The USD/JPY pair edged lower heading into the European session and dropped to three-day lows, around the 109.15 region in the last hour. The pair struggled to capitalize on its modest intraday uptick, instead met with some fresh supply near mid-109.00s and has now drifted into the negative territory for the third straight session. Friday's disappointing US Retail Sales figures reaffirmed the Fed's dovish view and kept the US dollar bulls on the defensive. This, in turn, capped the upside for the USD/JPY pair.

In fact, the headline sales remained virtually unchanged during the reported month, marking a sharp deceleration from March's upwardly revised reading of 10.7% (9.8% estimated previously). Adding to this, sales excluding autos decline 0.8% MoM in April, while the closely watched Retail Sales Control Group also fell short of market expectations and came in at -1.5%. Bearish traders further took cues from the ongoing decline in the US Treasury bond yields, which was seen as another factor that acted as a headwind for the USD. On the other hand, worries over the continuous surge in new coronavirus cases in Asia underpinned the safe-haven Japanese yen and further contributed to the USD/JPY pair's intraday decline back closer to the 109.00 round figure.