- USD/JPY remained confined in a narrow trading band below the 104.00 round-figure mark.
- COVID-19 vaccine optimism undermined the safe-haven JPY and extended some support.
- Dovish Fed expectations weighed on the USD bulls on the defensive and capped the upside.
The USD/JPY pair extended its sideways consolidative price move through the Asian session on Monday and remained confined in a narrow trading band below the 104.00 mark.
A combination of diverging forces failed to provide any meaningful impetus to the major and led to a subdued/range-bound price action on the first day of a new trading week. The optimism over the prospect of an early rollout of coronavirus vaccines undermined demand for the safe-haven Japanese yen. This, in turn, was seen as a key factor lending some support to the USD/JPY pair.
However, the upside remained limited, at least for the time being, amid a weaker tone surrounding the US dollar. Concerns about the economic fallout from the imposition of new COVID-19 restrictions in several US states have been fueling speculations for additional monetary easing by the Fed. This, along with sliding US Treasury bond yields kept the USD bulls on the defensive.
Hence, the key focus will be on this week’s release of the latest FOMC meeting minutes, which will be scrutinized for the possibility of such an action as soon as the December meeting. In the meantime, the broader market risk sentiment and the USD price dynamics might continue to play a key role in influencing the USD/JPY pair and assist traders to grab some short-term opportunities.
Apart from this, traders might also take cues from Monday’s release of the US Manufacturing and Services PMI prints for October, due later during the early North American session.
Technical levels to watch
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