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  • USD/JPY gained traction on Monday amid fading safe-haven demand.
  • Trump’s health update provided a strong lift to the global risk sentiment.
  • A weaker tone surrounding the USD might keep a lid on any strong gains.

The USD/JPY pair edged higher through the first half of the European trading action and was last seen hovering near the top end of its daily range, around the 105.60-65 region.

The pair caught some fresh bids on the first day of a new trading week and built on the previous day’s rebound of around 35 pips from seven-day lows, or levels below the key 105.00 psychological mark. The momentum was sponsored by the upbeat market mood, which tends to undermine demand for the safe-haven Japanese yen.

Positive news about Trump’s coronavirus infection helped eased some of the political uncertainty and boosted investors’ confidence. This was evident from a strong rebound in the equity markets, which drove flows from traditional safe-haven assets. Bulls further took cues from a pickup in the US Treasury bond yields.

However, the emergence of some fresh selling around the US dollar might hold bulls from placing any aggressive bets and keep a lid on any runaway rally for the USD/JPY pair. This makes it prudent to wait for some strong follow-through buying beyond the 105.70-75 supply zone before positioning for any further appreciating move.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Non-Manufacturing PMI. The data might influence the USD price dynamics. This, along with the broader market risk sentiment, will assist traders to grab some meaningful trading opportunities on Monday.

Technical levels to watch