- A combination of factors assisted USD/JPY to gain some positive traction on Monday.
- The prevalent risk-on mood, Japanese GDP report undermined the safe-haven JPY.
- Worsening US-China relations, subdued USD demand kept a lid on any further gains.
The USD/JPY pair edged higher during the Asian session on Monday, albeit lacked any strong follow-through and remained confined well within a four-day-old trading range.
A combination of supporting factors assisted the pair to gain some positive traction on the first day of a new trading week. The global risk sentiment got a strong boost in reaction to the Fed Chair Jerome Powell's optimistic comments about the US economy over the weekend.
The risk-on mood weighed on the safe-haven Japanese yen, which was further pressured by data showing that the domestic economy sank into recession during the first quarter of 2020. In fact, Japan’s economic activity shrank 0.9% QoQ and 3.4% YoY in the January-March quarter.
However, worsening US-China relations kept a lid on any runaway rally for the USD/JPY pair. It is worth recalling that the US Commerce Department on Friday moved to block chip supplies to Huawei Technologies and the subsequent reports flagged a possible retaliation by China.
This comes on the back of growing fears about the second wave of coronavirus infections, which should continue to hold investors from placing aggressive bullish bets. This make it prudent to wait for some strong follow-through buying before positioning for any further appreciating move.
In the absence of any major market-moving economic releases from the US, the incoming trade-related headlines might influence the broader market risk sentiment and play a key role in producing some meaningful trading opportunities around the major.
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
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.