- A combination of divergent factors fails to provide a significant boost to USD / JPY.
- Moderate USD demand limits initial positive intraday movement to three-day highs.
- Risk appetite sentiment and a strong recovery in US bond yields could help limit any sharp decline.
The pair USD/JPY is extending its side consolidation price action and remains trapped within a range, below the 105.50 region, at the beginning of the session eirpea on Monday.
He optimistic feeling prevailing in the market, as shown by the strong gains in the stock markets, has weighed on the safe-haven Japanese yen and it has helped the USD / JPY pair gain some traction on the first day of a new week. The rebound has pushed the pair to three-day highsalthough the rise has remained limited amid subdued demand for the US dollar.
Global risk sentiment remains supported by the Revival of Hopes for Additional US Fiscal Stimulus Measures and for the expectations of a vaccine for COVID-19 by the end of this year. However, nervousness about the political situation in the US has prevented the USD bulls from opening aggressive new positions and has limited the rise of the USD / JPY pair.
Meanwhile, the money flow of risk appetite has led to a sharp rally in U.S. Treasury yields. This, along with concerns that a sharp rise in new coronavirus cases could trigger new lockdown measures and proving detrimental to global economic growth, it has continued to lend some support to the USD as a global reserve currency.
This makes it prudent to wait for a strong continuation of selling before positioning for any other short-term bearish movements for the USD / JPY pair. On the other hand, a sustained move above the 105.50 region will be seen as a new trigger for the bulls and will pave the way for a move towards the round 106.00 level.
There is no major economic data release on Monday. Therefore, the focus of attention will be on a scheduled speech by Fed Chairman Jerome Powell. Apart from this, the broader market risk sentiment will play a key role in influencing the USD / JPY pair and generating some significant trading opportunities.
USD / JPY technical levels
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Credits: Forex Street
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