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  • USD/JPY extended last week’s retracement slide edged lower for the third consecutive session.
  • A softer risk tone benefitted the safe-haven JPY; dovish Fed expectations weighed on the USD.
  • Rebounding US bond yields held bearish traders from placing fresh bets and helped limit losses.

The USD/JPY pair remained depressed through the early North American session, albeit has still managed to hold its neck above the 109.00 mark.

A combination of factors exerted some pressure on the major for the third consecutive session on Monday and dragged it further away from one-month tops, around the 109.75-80 region set last week. A generally softer risk tone extended some support to the safe-haven Japanese yen. On the other hand, the US dollar was weighed down by dovish Fed expectations.

Friday’s disappointing US monthly Retail Sales figures overshadowed a red-hot consumer inflation report and reaffirmed that the Fed will keep interest rates low for a longer period. This, in turn, was seen as a key factor that continued acting as a headwind for the USD and dragged the USD/JPY pair lower on the first trading day of a new week.

That said, a goodish rebound in the US Treasury bond yields held traders from placing any aggressive bets and helped limit the downside, at least for the time being. In the absence of any major market moving economic releases from the US, this makes it prudent to wait for some strong follow-through selling before positioning for any further depreciating move.

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