- USD/JPY gained some traction on Monday staged a modest recovery from multi-month lows.
- The prevalent upbeat market mood undermined the safe-haven JPY and remained supportive.
- A subdued USD price action failed to impress bulls or provide any additional boost to the pair.
The USD/JPY pair edged higher through the Asian session on Monday and was last seen hovering near the top end of its daily trading range, around the 103.50-60 region.
The pair managed to gain some positive traction on the first day of a new trading week and for now, seems to have stalled its recent bearish slide to the lowest level since March 12. The prevalent risk-on environment undermined demand for the safe-haven Japanese yen, which, in turn, was seen as a key factor that prompted some short-covering move amid oversold conditions on short-term charts.
The already upbeat market mood got an additional boost after the Democratic candidate Joe Biden was finally declared the winner of a nail-biting US presidential elections, which eliminated some of the uncertainties. Strong Chinese trade balance data released over the weekend further boosted investors’ confidence and remained supportive of the prevalent risk-on flows across the global equity markets.
Meanwhile, the possibility of a split congress fueled speculations that the Fed will have to ease further to support the economy amid the near-term risk of rising COVID-19 infection. This, in turn, kept the US dollar bulls on the defensive. Adding to this, the incumbent President Donald Trump’s threats of legal action remain a cause for uncertainty capped the upside for the USD/JPY pair.
Even from a technical perspective, the pair last week confirmed a bearish breakdown through descending triangle support near the 104.00 mark. This makes it prudent to wait for some follow-through buying before confirming that the USD/JPY pair has bottomed out in the near-term and positioning for any further appreciating move.
Technical levels to watch
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