“¢ Dovish Fed expectations continue to weigh on the greenback.
“¢ Deteriorating risk-sentiment underpin JPY’s safe-haven demand.
“¢ Focus shifts to this week’s FOMC meeting and US-China trade talks.
The USD/JPY pair extended Friday’s rejection slide from the vicinity of the key 110.00 psychological mark and traded with a negative bias at the start of a new trading week.
Despite a general risk-on mood on Friday, further fueled by the fact that the US President Donald Trump announced to temporarily re-open the US government for three weeks, the pair failed to capitalize on the early uptick and started retreating from the top end of its weekly trading range.
Meanwhile, the US Dollar met with some aggressive supply after news reports indicated that the Fed is considering to stop shrinking its massive balance sheet earlier than anticipated and reinforced market expectations that the Fed’s current policy tightening cycle might have already ended.
Meanwhile, a slight deterioration in risk sentiment on Monday, as depicted by a weaker tone around equity markets and reinforced by a modest pull-back in the US Treasury bond yields, underpinned the Japanese Yen’s safe-haven demand and exerted some additional downward pressure.
In absence of any major market moving economic releases, the broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair’s momentum as attention shifts to this week’s FOMC meeting and high-level US-China trade talks.
Technical levels to watch
Immediate support is pegged near the 109.15-10 region, below which the pair is likely to slide further below the 109.00 handle towards testing its next support near the 108.75-70 region. On the flip side, the 109.60 horizontal level now seems to act as an immediate resistance, which if cleared might assist the pair to make a fresh attempt towards conquering the 110.00 handle.
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