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  • US Dollar Index gains traction in the NA session on Monday.
  • Wall Street stays in red, 10-year T-bond yield erases 1%.  
  • Risk-off atmosphere caps gains for the time being.

After spending the first half of the day in a tight range near mid-108s, the USD/JPY pair gained traction and rose to its highest level since June 11 at 108.73. As of writing, the pair was trading at 108.70, adding 0.25% on a daily basis.

With investors trying to figure out how the Fed will shape its monetary policy and its forward guidance following last Friday’s strong nonfarm payrolls report, which showed an increase 224,000 to beat analysts’ forecast of 160,000, the greenback preserves its strength. At the moment, the US Dollar Index is up 0.25% on the day at 97.40.

Commenting on the Fed’s possible policy stance after Friday’s NFP data,  “With the balance of risks appearing somewhat tilted to the downside for global growth, this is not the time to let monetary policy drift into a slightly restrictive stance,” noted analysts at National Bank Financial. “In that context, we see the FOMC lowering the  fed  funds target range by 25 bps on July 31th and again in Q4.”

Despite the broad USD strength, the fact that the 10-year US Treasury bond yield is losing nearly 1% on the day and the major equity indexes are posting losses points to a sour market sentiment that helps the safe-haven JPY show resilience.

On Tuesday, markets will be paying close attention to speeches by Atlanta Fed President Bostics, FOMC Chairman Powell, and    Head of Supervision at the Federal Reserve  Randy Quarles.

Technical levels to watch for