- USD / JPY captures some new purchases on Monday and recovers a portion of the post-NFP losses.
- Risk appetite weighs on the safe-haven JPY and supports the pair.
- A good rally in the dollar from month-long lows continues to support the pair’s modest rally.
The pair USD/JPY moves higher at the start of the European session on Monday, rising above the 109.80 level. At the time of writing, the pair is holding onto gains near its daily highs around 109.88.
A combination of supporting factors has helped the USD / JPY pair attract some buying on the first day of a new week and regain a portion of Friday’s post-NFP drop to the 109.60-55 support zone. The underlying bullish sentiment in financial markets has continued weighing on the safe-haven Japanese yen. This, coupled with a good bounce in the US dollar from month-long lows, has provided a modest rise to the USD / JPY pair.
The disappointing NFP figure has, to some extent, been offset by an upward revision of the already optimistic reading of the previous month. Apart from this, a further decline in unemployment rate and strong wage growth data They kept hopes alive for an imminent Fed announcement. Investors expect the Fed to signal a reduction in its bond buying program in September, but now expect it to begin in December and likely end QE in mid-2022.
This has been evident by a strong rebound in US Treasury yields. In fact, the yield on the US 10-year government bond rose again above 1.32% on Friday and provided much-needed respite for USD bulls. This, in turn, was seen as a key factor that extended some support to the USD / JPY pair. The rally, however, has lacked a strong following, which warranted some caution for aggressive bulls.
US markets will be closed on Monday in observance of Labor Day. This further warrants some caution before confirming that the recent pullback in the 110.40 region is over and positioning for any significant intraday bullish movements.
USD / JPY technical levels
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