USD/JPY stays in the red near 109.35-30 horizontal support

• USD/JPY added to the post-NFP losses and edged lower for the second consecutive session.
• A cautious mood benefitted the safe-haven JPY and exerted some pressure on the major.
• A goodish pickup in the US bond yields underpinned the USD and might help limit losses.

The USD/JPY pair remained depressed through the first half of the European session and dropped to fresh daily lows, around the 109.35 region in the last hour.

The pair added to Friday’s softer NFP-inspired losses and witnessed some follow-through selling on the first day of a new trading week. This marked the second consecutive day of downfall and was exclusively sponsored by a cautious mood around the equity markets, which tends to benefit the safe-haven Japanese yen. That said, a combination of factors should help limit any further losses for the USD/JPY pair, at least for the time being.

The latest US monthly jobs report tempered expectations that the Fed will tighten monetary policy sooner rather than later. That said, concerns about rising inflationary pressure acted as a tailwind for the US bond yields ahead of this week’s release of the latest US consumer inflation figures on Thursday. This, in turn, extended some support to the US dollar and might hold traders from placing aggressive bearish bets around the USD/JPY pair.

Moreover, investors remain worried that an extension of the state of emergency in Tokyo and eight other prefectures could hinder Japan’s fragile economic recovery. This might turn out to be another factor that might extend some support to the USD/JPY pair. Hence, it will be prudent to wait for some strong follow-through selling before positioning for any further depreciating move amid absent relevant market moving economic releases from the US.

Technical levels to watch