USD/JPY stays directionless near 107 despite upbeat sentiment

• US 10-year Treasury bond yield pushes higher on Monday.  
• US Dollar Index clings to modest daily gains.
• Wall Street looks to open the day modestly higher.

The USD/JPY pair is consolidating last week’s gains and is  trading in a very tight range on Monday amid a lack of significant macroeconomic drivers. As of writing, the pair was up 0.05% on a daily basis at 106.95.

Risk-on atmosphere remains intact

Easing fears over a protracted US-China trade conflict last week and rising hopes of the global economy picking up momentum by a recovery in the Chinese economy allowed risk-on flows to dominate the markets last week. After falling for five straight weeks, the 10-year US Treasury bond yield rose more than 4% last week and is now up nearly 2% on the day.

Reflecting the upbeat market mood ad the start of the week, major European equity indexes post modest gains and the S&P 500 Futures add 0.3% to suggest that Wall Street’s main indexes are likely to start the day in the positive territory.

Ahead of Thursday’s inflation data from the US, the economic calendar won’t be featuring any significant data releases that could have a meaningful impact on the pair’s action. Additionally, the Federal Reserve has gone into the blackout period ahead of next week’s critical FOMC meeting, suggesting that there won’t be any remarks on the policy outlook from Fed officials.  

Until then, investors are likely to remain focused on headlines surrounding the US-China trade conflict and potential changes in markets’ risk perception.

Technical levels to watch for