Search ForexCrunch
  • Fading safe-haven demand weighed on the JPY and helped regain traction.
  • Bullish traders further took cues from a goodish pickup in the US bond yields.
  • Fed rate cut expectations might cap strong gains, warranting some caution.

The USD/JPY pair edged higher on the first day of a new trading week and is currently placed at session tops, just above mid-108.00s.
Following an early dip to the 108.30 region, the pair managed to regain some positive traction and for now, seems to have snapped three consecutive days of losing streak. The prevalent positive trading sentiment around equity markets was seen as one of the key factors weighing on the Japanese Yen’s safe-haven status and extended some support.

Bulls lack strong conviction

The risk-on mood across global financial markets was further reinforced by a goodish pickup in the US Treasury bond yields, which helped ease the recent US Dollar selling bias and remained supportive of the pair’s modest intraday uptick of around 20-25 pips from near one-week lows touched earlier during the Asian session on Monday.
It, however, remains to be seen if the pair is able to capitalize on the momentum or runs into some fresh supply at higher levels amid firming market expectations that the Fed will cut interest rates further at its upcoming meeting on October 29-30, warranting some caution before placing any aggressive bets for a further near-term appreciating move.
This coupled with growing worries about the health of the global economy might further collaborate towards the upside, at least for the time being. Hence, traders are likely to wait for a strong follow-through buying and a sustained move beyond last week’s swing high, just ahead of the 109.00 handle, in order to confirm near-term bullish bias.
In absence of any major market-moving economic releases, the broader market risk sentiment and the USD price dynamics might continue to act as key determinants of the pair’s momentum and will be looked upon to grab some short-term trading opportunities.

Technical levels to watch