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  • 10-year United States (US) Treasury bond yield stays relatively calm on Monday.
  • US Dollar Index posts modest recovery gains below the 99 mark.
  • Wall Street looks to open the day in the negative territory.

The USD/JPY pair lost nearly 100 pips last week and started the new week in a quiet manner. As of writing, the pair was trading at 106.85, losing 0.1% on a daily basis.

Last Friday, the labour market data from the United States painted a mixed picture. Although the unemployment rate fell to its lowest level in nearly 50 years at 3.5%, nonfarm payrolls increased less than expected and the annual wage inflation dropped to 2.9%.

The US Dollar Index struggled to gain traction after the data and registered a weekly loss of 0.3% as investors price the expectation of the Federal Reserve cutting the policy rate again in October. According to the CME Group FedWatch, there is an 80% probability of a 25 basis point rate cut at the end of this month.

Market sentiment is likely to drive the pair

Meanwhile, major equity indexes in the United States capitalized on rate cut expectations and posted strong gains on Friday to make it difficult for safe-haven JPY  to outperform the Greenback. However, reports of a second whistle-blower coming forward over the weekend with regards to US President Trump’s dealings with Ukraine, Wall Street might start the week on a negative note. At the moment, the S&P 500 Futures is down 0.35% on the day.

There won’t be any significant macroeconomic data releases from the US on Monday. Although Federal Open Market Committee (FOMC) Chairman Powell is scheduled to deliver a speech at 17:00 GMT, he is unlikely to comment on the policy outlook.

Technical levels to watch for