- USD/JPY edged lower on the first day of a new trading week amid sustained USD selling bias.
- The upbeat market mood might undermine the safe-haven JPY and help limit deeper losses.
- Investors might now refrain from placing any aggressive bets ahead of the FOMC and BoJ.
The USD/JPY pair remained depressed through the early North American session and was last seen hovering near the lower end of its daily trading range, just below the 106.00 mark.
The pair came under some renewed selling pressure on the first day of a new trading week and was pressured by the heavily offered tone surrounding the US dollar. Fading prospects for the next round of the US fiscal stimulus measures continued undermining the greenback, which, in turn, was seen as a key factor exerting pressure on the USD/JPY pair.
Adding to this, a growing diplomatic spat between the world’s two largest economies benefitted the safe-haven Japanese yen and further contributed to the USD/JPY pair’s downfall. In the latest developments, China announced that Beijing has sent a note detailing reciprocal restrictions on the US Embassy and consulates on Friday.
Meanwhile, a strong rally in the global equity markets – amid renewed optimism over a potential vaccine for the highly contagious coronavirus disease – might help limit deeper losses. Investors might also refrain from placing aggressive bets ahead of this week’s central bank events – the FOMC on Wednesday and BoJ decision on Thursday.
Even from a technical perspective, the USD/JPY pair has been oscillating between two converging trend-lines, which constitute the formation of a symmetrical triangle. The set-up further warrants some caution and make it prudent to wait for a sustained move in either direction before positioning for the pair’s near-term trajectory.