- USD/JPY eases from a fresh YTD peak touched on Monday amid a modest USD downtick.
- The Fed-BoJ policy divergence acts as a tailwind for the pair and helps limit the downside.
- Investors now look forward to the US macro data to grab short-term trading opportunities.
The USD/JPY pair corrects from a fresh YTD top touched earlier this Monday and remains on the defensive through the first half of the European session. Spot prices, however, manage to hold above the 136.00 mark and seem poised to prolong the recent upward trajectory witnessed since the beginning of this month.
A softer tone surrounding the US Treasury bond yields trigger a modest US Dollar pullback from a seven-week high, which, in turn, is seen exerting some downward pressure on the USD/JPY pair. That said, a combination of factors acts as a tailwind for the major and helps limit the downside, warranting some caution before positioning for any meaningful depreciating move.
The Japanese Yen (JPY) is weighed down by dovish remarks from the incoming Bank of Japan (BoJ) Governor Kazuo Ueda, stressing the need to maintain the ultra-loose policy to support the fragile economy. Ueda further added that it is possible to push up prices and wages with monetary easing. This, along with a modest recovery in the US equity futures, undermines the safe-haven JPY.
Apart from this, expectations that the Federal Reserve will stick to its hawkish stance should act as a tailwind for the US bond yields and lend some support to the Greenback. Meanwhile, the divergent Fed-BoJ policy outlook supports prospects for the emergence of some dip-buying at lower levels and suggests that the path of least resistance for spot prices is to the upside.
Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and Pending Home Sales data later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics. Traders will further take cues from the broader risk sentiment to grab 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.