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  • USD/JPY struggled to gain any traction and remained below the 104.00 on Monday.
  • Dovish Fed expectations kept the USD bulls on the defensive and capped the upside.
  • The risk-on mood undermined the safe-haven JPY and helped limit any deeper losses.

The greenback remained depressed through the early North American session, with the USD/JPY pair struggling near the lower end of its daily trading range, around the 103.70 region.

The pair failed to capitalize on the previous session’s attempted recovery move and witnessed some fresh supply on the first day of a new trading week. The prevalent selling bias surrounding the US dollar was seen as one of the key factors exerting some pressure on the USD/JPY pair, though the upbeat market mood helped limit deeper losses, at least for the time being.

The USD was being weighed down by growing speculations for additional monetary easing by the Fed amid concerns about the economic fallout from the imposition of new COVID-19 restrictions in several US states. Even a goodish pickup in the US Treasury bond yields failed to impress the USD bulls, albeit turned out to be one of the key factors lending some support to the USD/JPY pair.

Meanwhile, the latest optimism about a potential vaccine for the highly contagious coronavirus disease boosted investors’ confidence. This was evident from a bullish trading sentiment around the equity markets, which undermined the safe-haven Japanese yen and held bearish traders from placing aggressive bets. This, in turn, assisted the USD/JPY pair to hold above mid-103.00s.

Market participants now look forward to the release of the flash version of the US Manufacturing and Services PMI prints for November. The data might influence the USD price dynamics. This, along with the broader market risk sentiment, should assist traders to grab some short-term opportunities. The key focus, however, will be on the FOMC meeting minutes, scheduled for release on Wednesday.

Technical levels to watch

 

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