The USD/JPY pair builds on last week's rally from the 133.75 area and gains some follow-through traction for the third straight day on Monday. Spot prices, however, retreat a few pips from a one-and-half-week high touched in the last hour and slide below the 136.00 mark during the early European session.

The US Dollar (USD) pulls back from its highest level since April touched this Monday and turns out to be a key factor acting as a headwind for the USD/JPY pair. The downside for the USD, meanwhile, seems cushioned, at least for the time being, amid reviving bets that the Federal Reserve (Fed) might stick to its hawkish stance in the wake of a rise in the US long-term inflation expectations.

In fact, the preliminary May reading from the University of Michigan released on Friday showed that consumers see prices over the next five years climbing at an annual rate of 3.2%  - the highest since 2011. This could force the Federal Reserve (Fed) to keep interest rates higher for longer, which continues to lend support to the US Treasury bond yields and underpin the Greenback.

The Japanese Yen (JPY), on the other hand, might continue to be weighed down by the Bank of Japan's (BoJ) dovish outlook. It is worth recalling that BoJ Governor Kazuo Ueda said last week that it was too early to discuss specific plans for an exit from the massive stimulus program. This, along with a positive tone around the US equity futures, might lend some support to the USD/JPY pair.

Market participants now look to the US economic docket, featuring the release of the Empire State Manufacturing Index. This, along with a scheduled speech by Minneapolis Fed President Neel Kashkari, will drive the USD demand and provide some impetus to the USD/JPY pair. Traders will further take cues from the broader risk sentiment to grab short-term opportunities around the major