- A combination of factors pushed USD/JPY higher for the second straight session on Monday.
- A positive risk tone undermined the safe-haven JPY and remained supportive of the move up.
- The USD benefitted from hawkish Fed expectations and provided an additional lift to the pair.
The USD/JPY pair edged higher through the early European session and climbed to one-and-half-week tops, around the 114.35 region in the last hour.
The pair build on its recovery move from two-week lows, around the 113.25 region touched last Thursday and gained some follow-through traction on the first day of a new week. This marked the second successive day of a positive move for the USD/JPY pair and was sponsored by a combination of factors.
Japanese Prime Minister Fumio Kishida’s victory in snap elections raised hopes for additional stimulus and boosted investors' sentiment. This was evident from a generally positive tone around the equity markets, which undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair.
Traders further took cues from a modest US dollar strength and seemed unaffected by the disappointing release of the official Chinese PMI prints over the weekend. The USD stood tall near two-and-half-week tops and remained well supported by expectations for an early policy tightening by the Fed.
Data released on Friday showed that the Fed's preferred inflation gauge held steady near 30-year highs and indicated that consumer cost pressures are getting entrenched. This fueled speculations that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly higher inflation.
Hence, the market focus will remain on the outcome of a two-day FOMC monetary policy meeting, starting this Tuesday. The Fed is scheduled to announce its decision during the US session on Wednesday, which will influence the USD price dynamics and determine the near-term trajectory for the USD/JPY pair.
In the meantime, Monday's release of the US ISM Manufacturing PMI will be looked upon for some impetus later during the early North American session. Apart from this, the broader market risk sentiment should further allow traders to grab some short-term opportunities around the USD/JPY pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.