- The nervousness around covid-19 cannot help the USD / JPY capitalize on its modest intraday gains on Monday.
- A softer risk tone benefits the safe-haven JPY and triggers further selling in the pair.
- The Fed’s optimistic expectations could act as a tailwind for the USD and help limit any deeper losses in the pair.
The pair USD/JPY has moved lower during Monday’s European session, with bears now expecting a sustained break below the key psychological level of 110.00.
The pair has built on the good bounce of the previous session from 109.50, or near one-month lows, and has moved higher during the first half of trading on the first day of a new trading week. The rebound has been seen supported by a modest strength of the US dollar, although concerns about new coronavirus variants have limited any further gains for the USD / JPY pair.
Investors now seem convinced that the Fed could be moving towards tightening its monetary policy stance earlier than expected, which, in turn, has acted as a tailwind for the USD. In fact, minutes from the June FOMC meeting released last Wednesday revealed that Fed officials agreed on the need to be ready to act if inflation or other risks materialize.
Therefore, the market will focus on the latest consumer inflation figures in the United States, to be released on Tuesday. Aside from this, Fed Chairman Jerome Powell’s semi-annual testimony in Congress on Wednesday and Thursday will be scrutinized for clues about the US central bank’s monetary policy outlook. This will play a key role in influencing the USD in the short term.
In the meantime, the supporting factor, to a greater extent, has been offset by concerns about the economic consequences of the spread of the Delta variant highly contagious from coronavirus. This has been evidenced by a sharp decline in US equity futures, which has supported the safe-haven Japanese yen and contributed to the latter stage of the last hour’s slide.
Looking ahead, there is no major economic data release on Monday. Therefore, developments around the coronavirus saga will continue to drive broader market risk sentiment and influence the safe-haven JPY. This, coupled with USD price dynamics, could generate some short-term trading opportunities around the USD / JPY pair.
Technical levels to observe
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
