USD/JPY retreats toward mid-108s despite rising US T-bond yields

• 10-year US Treasury bond yield gains more than 1.5% on Monday.
• Broad-based USD weakness doesn’t allow the pair to gain traction.
• Wall Street’s main indexes look to open in the positive territory.  

The USD/JPY pair struggled to make a decisive move in either direction last week and fluctuated in a relatively tight range above the 108 handle. Although the pair climbed to 108.70 area during the European morning, it failed to preserve its momentum and has returned to 108.50 area in the early trading hours of the American session. As of writing, the pair was up 0.08% on the day at 108.51.

Risk-on flows dominate the market on Monday

Earlier in the day, heightened hopes of the UK parliament approving the Brexit deal allowed risk-on flows to continue to market action. Reflecting the upbeat mood, major equity indexes in Europe surged higher. As of writing, Germany’s DAX was up 1% on the day while the UK’s FTSE 100 was adding 0.4%. Additionally, the 10-year US Treasury bond yield is gaining more than 1.5% to confirm the positive sentiment. Finally, the S&P 500 Futures is up 0.4% to suggest that Wall Street’s main indexes are likely to start the day in the positive territory.

In the meantime, during  an interview with Fox Business Network on Monday, White House economic adviser Larry Kudlow said trade talks with China were going very well and noted that they could suspend December tariffs if they were to make progress to provide an additional boost to the sentiment.

Nevertheless, the broad-based selling pressure surrounding the Greenback makes it difficult for the pair to push higher. As of writing, the US Dollar Index was moving sideways near the 97.20  mark.

There won’t be any macroeconomic data releases from the US in the remainder of the day and markets are likely to continue to react to changes in the risk perception.

Technical levels to watch for