- USD / JPY saw some selling for the second day in a row on Tuesday.
- Nervousness around COVID-19 benefits the safe-haven JPY and puts downward pressure on the pair.
- Rising US bond yields support the USD, although it does little to support it.
The pair USD/JPY maintains its selling tone during the European session on Tuesday and is trading near daily lows around the region of 110.00.
Investors follow concerned about the possible economic consequences of the spread of the Delta variant highly contagious from coronavirus. This, coupled with strong selling in Chinese equities, has weighed on investor sentiment and benefited the safe-haven Japanese yen. This, in turn, has put some downward pressure on the USD / JPY pair for the second day in a row on Tuesday.
On the other hand, the US dollar has found some support from a modest rebound in US Treasury yields. In fact, the yield on the 10-year US government bond again approached the 1.30% level early on Tuesday, although it has done to support the USD / JPY pair. That said, the decline is likely to remain supported before the FOMC meeting.
The Fed will begin its monetary policy meeting two days later this Tuesday and will announce the decision on Wednesday. The result will play a key role in influencing short-term USD price dynamics. Aside from this, developments around the coronavirus saga will boost demand for the safe-haven JPY and allow investors to seize some short-term opportunities around the USD / PY pair.
Meanwhile, investors could take indications from the US economic calendar, which highlights the publication of durable goods orders and the Conference Board consumer confidence index. This, coupled with US bond yields, could provide some boost later at the start of the US session.
USD / JPY technical levels to be observed
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