- Lingering concerns over Evergrande benefit the safe haven JPY and limit the USD / JPY pair.
- A pullback in US bond yields keeps USD bulls on the defensive and also acts as a headwind for the pair.
- Rising expectations of an early Fed rate hike and the breaking of the 110.25-30 hurdle favor the pair’s bulls.
The pair USD / JPY lacks a firm directional bias and it moves between tepid gains and minor losses, above 110.50, during Monday’s European session.
A combination of divergent factors has not helped the USD / JPY to capitalize on last week’s positive movement and has led to a limited price action within a range on the first day of a new trading week. Concerns about Possible Risks of the Evergrande Group Debt Crisis They resurfaced after passing the deadline to pay $ 83.5 million in interest on approved bonds without any comment from the company. This, in turn, has benefited the Japanese yen as a safe haven and acted as a headwind for the pair.
The bears have also taken indications of a modest pullback in Treasury yields of the United States, which has kept the bulls of the US dollar on the defensive and has helped to limit the USD / JPY pair. That said, the prevailing risk appetite, along with prospects for an early rate hike by the Fed, has continued to provide some support to the USD and it has helped limit the pair’s decline. It’s worth remembering that the Fed’s so-called dot chart indicated the inclination of policymakers to raise interest rates in 2022.
Even from a technical perspective, Friday’s sustained break above the 110.25-30 resistance zone and a subsequent strength beyond the previous monthly highs favors the bulls. Some follow-up buying beyond the 110.80 region will reaffirm the constructive outlook and pave the way for an extension of the recent strong bounce from the strong horizontal support at 109.10. Market participants are now awaiting the release of US durable goods orders for further momentum.
This, coupled with US bond yields and scheduled speeches from a number of influential FOMC members, could influence the dynamics around the USD. Apart from this, the broader market risk sentiment could also generate some significant trading opportunities around the USD / JPY pair.
USD / JPY technical levels
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