- USD/JPY gained some traction on Monday amid receding demand for the safe-haven JPY.
- A subdued USD price action, sliding US bond yields kept a lid on any meaningful upside.
- Investors might refrain from placing aggressive bets ahead of Jackson Hole symposium.
The USD/JPY pair edged higher during the Asian session, albeit lacked any strong follow-through and remained capped below the 106.00 mark.
Following the previous session’s good two-way price moves, the pair managed to regain some positive traction and was supported by receding safe-haven demand for the Japanese yen. The global risk sentiment got a minor lift at the start of a new week after the US Food & Drug Administration (FDA) authorised the use of blood plasma from recovered patients as a treatment option.
The sentiment was also supported by reports that the Trump administration is considering by-passing normal US regulatory standards to fast-track an experimental coronavirus vaccine from the UK. This, in turn, undermined traditional safe-haven assets, including the Japanese yen, and extended some support to the USD/JPY pair. However, a combination of diverging forces kept a lid on any further gains.
The US political deadlock over the next round of the US fiscal stimulus measures, along with concerns about the US economic recovery held the US dollar bulls from placing aggressive bets. Apart from this, a weaker tone surrounding the US Treasury bond yields, amid speculations of further easing by the Fed, further collaborated towards capping the USD/JPY pair, at least for the time being.
Hence, the market focus will remain on the Fed Chair Jerome Powell’s scheduled speech during the Jackson Hole symposium later this week. Powell’s remarks will be closely scrutinized for clearer guidance on the US central bank’s outlook. This will play a key role in influencing the near-term USD price dynamics and assist investors to determine the USD/JPY pair’s next leg of a directional move.
In the meantime, the broader market risk sentiment will be looked upon for some short-term trading opportunities amid absent relevant market moving economic releases. This makes it prudent to wait for some strong follow-through buying before traders start positioning for any further appreciating move.
Technical levels to watch
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