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  • A softer tone surrounding the USD prompted some selling around USD/JPY on Monday.
  • The upbeat market mood, uptick in the US bond yields helped limit any meaningful slide.

The USD/JPY pair remained depressed through the early European session and was last seen hovering near the lower end of its daily trading range, around the 103.70-65 region.

The pair failed to capitalize on the previous session’s positive move, instead met with some fresh supply on the first day of a new trading week amid a softer tone surrounding the US dollar. That said, a combination of factors extended some support to the USD/JPY pair and helped limit deeper losses, at least for the time being.

The increasing likelihood of additional US financial aid, to a larger extent, offset worries about the potential economic fallout from the ever-increasing coronavirus cases. This was evident from the underlying bullish sentiment around the equity markets, which tend to undermine demand for the safe-haven Japanese yen.

Meanwhile, expectations for a larger government borrowing and the prevalent risk-on mood pushed the US Treasury bond yields higher. This was seen as another factor that held traders from placing aggressive bearish bets around the USD/JPY pair and makes it prudent to wait for some follow-through selling before positioning for any further decline.

In the absence of any major market-moving economic releases from the US, developments surrounding the coronavirus saga and the US stimulus headlines will play a key role in driving the broader market risk sentiment. This, along with the USD price dynamics might further contribute to produce some short-term trading opportunities around the USD/JPY pair.

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