- USD/JPY struggled for a firm directional and remained confined in a range on Monday.
- The risk-off mood might benefit the safe-haven JPY and cap any upside for the major.
- Sliding US bond yields seemed to undermine the USD and might exert some pressure.
- The market focus now shifts to the BoJ monetary policy update, scheduled on Tuesday.
The USD/JPY pair extended its sideways consolidative price action and remained confined in a narrow trading band, below the 107.50 region.
The pair struggled to capitalize on Friday’s goodish intraday positive move of around 100 pips and seesawed between tepid gains/minor losses through the early North American session. Fears of a second wave of coronavirus infections triggered a fresh wave of the global risk-aversion trade on Monday and benefitted the safe-haven Japanese yen.
Apart from the global flight to safety, the Fed’s bleak outlook for the US economy led to some follow-through slide in the US Treasury bond yields. This, in turn, undermined demand for the US dollar and further collaborated towards keeping a lid on any meaningful positive move for the USD/JPY pair, at least for now.
Meanwhile, the release of better-than-expected Empire State Manufacturing Index, which improved to -0.2 for June as compared to -27.5 anticipated and -48.5 previous, failed to impress the USD bulls or provide any impetus to the USD/JPY pair. Investors seemed to wait for a fresh catalyst from the BoJ monetary policy update on Tuesday.
Hence, it will be prudent to wait for a sustained move in either direction before positioning to grab any meaningful trading opportunities. In the meantime, the pair seems more likely to continue with its subdued/range-bound trading action. However, the risk-off environment might exert some pressure and drag the USD/JPY pair back towards the 107.00 mark.
Technical levels to watch
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