“¢ Investors looked past Friday’s less hawkish comments by the Fed Chair Powell.
“¢ Some renewed USD buying helps ease the selling bias and bounce off lows.
“¢ Positive equities weigh on JPY’s safe-haven appeal and provide an additional boost.
The USD/JPY pair came under some fresh selling pressure at the start of a new trading week, albeit has managed to reverse an early dip to sub-111.00 level.
The pair extended Friday’s retracement slide from near three-week tops and was further weighed down by a follow-through US Dollar weakness, triggered by not so hawkish comments by the Fed Chair Jerome Powell. At a closely watched Jackson Hole symposium, Powell on Friday disappointed market participants and downplayed the need for aggressive policy tightening.
The Treasury yield curve reached its flattest level since 2007 in reaction to Powell’s speech and kept exerting downward pressure through the Asian session on Monday. The selling bias now seems to have abated, at least for the time being, with a modest USD rebound seen as one of the key factors lending some support at lower levels.
Adding to this, a positive tone around equity markets, pointing to growing investors’ appetite for riskier assets, weighed on the Japanese Yen’s safe-haven appeal and further collaborated towards easing the bearish pressure surrounding the major.
It, however, remains to be seen if the pair is able to regain positive traction or the current bounce is utilized as an opportunity to initiate some fresh bearish bets amid empty US economic docket and rising uncertainty for a December Fed rate hike.
Technical levels to watch
Any subsequent up-move beyond 111.15-20 area might continue to confront some fresh supply near mid-111.00s, above which the pair seems all set to aim towards reclaiming the 112.00 handle.
On the flip side, the 110.95-90 zone might continue to protect the immediate downside, which if broken might turn the pair vulnerable to head back towards testing 100-day SMA support near the 110.15 region.
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