- USD/JPY is bouncing around 80 pips from the daily low and updating daily highs in the last hour.
- A combination of factors undermines the JPY’s safe haven and lends the pair some support.
- Modest USD weakness could stop bulls from making aggressive bets and cap profits.
The pair USD/JPY attracts some buying on Monday’s intraday dips in the 137.50-137.45 area and hits a new daily high heading into the North American session. The pair is currently hovering around the 138.30-138.35 zone and seems to have stopped its pullback from the daily high reached on Friday for now.
Against the background of a more dovish stance taken by the Bank of Japan, optimism about a possible improvement in US-China relations undermines the safe haven of the Japanese yen (JPY) and acts as a tailwind for the USD/JPY pair. Indeed, BOJ Governor Kazuo Ueda said on Friday that tightening monetary policy on expectations that inflation will return below the 2% target by the middle of this fiscal year would hurt the economy. Ueda added that the BOJ will continue to ease with yield curve control.
Meanwhile, US President Joe Biden declared during the Group of Seven (G7) summit in Japan that he expects relations between the US and Beijing to improve soon. This, to some extent, offsets concerns about slowing global growth and weighs on the Yen. On the other hand, the US dollar is affected by the surprise breakdown of the debt ceiling negotiations and by the statements of the Federal Reserve Chairman, Jerome Powell. This could stop traders from making aggressive bullish bets on the USD/JPY pair.
Speaking at a Fed research conference, Powell said on Friday it was not yet clear whether interest rates will have to rise further amid uncertainty about the impact of past rate hikes and the recent tightening of bank credit. Elsewhere, Minneapolis Fed President Neel Kashkari said Monday that the decision to raise interest rates once more in June or pause was hard-fought. Apart from this, the US debt ceiling issues caused a further drop in US Treasury yields, which acts as a headwind for the dollar and could limit the USD/USD pair. JPY.
In the absence of relevant US economic data, attention will remain focused on a key meeting between President Joe Biden and Republican Speaker of the House Kevin McCarthy to discuss the debt ceiling. On the other hand, the US Bond Yield will influence the price dynamics of the dollar and will give momentum to the USD/JPY pair. Traders will follow signals from broader risk sentiment to take advantage of near-term opportunities ahead of the release of the BOJ Core CPI and Japan Flash Manufacturing PMI due during the Asian session on Tuesday.
technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
