- USD / JPY regains positive traction on Monday and recovers a significant portion of post-NFP losses.
- Risk appetite weighs on the safe-haven JPY and continues to support the pair’s positive move.
- A rally in US Treasury yields eases downward pressure from the USD and remains supportive.
The pair USD/JPY moves higher during the first half of trading action on Monday although has been limited just above the 109.00 level. At the time of writing, the pair is back slightly from the daily highs and is trading around the 108.75 region.
A combination of factors has helped the pair regain positive traction on the first day of a new trading week and recoup a significant portion of Friday’s post-NFP losses to lows of more than a week. The underlying bullish sentiment in financial markets has been seen as a key factor that has weighed on demand for the Japanese yen as a safe haven. Aside from this, concerns that the recent spike in COVID-19 cases could hamper Japan’s fragile economic recovery has acted as a headwind for the JPY.
On the other hand, a good recovery in US Treasury yields has helped the US dollar to experience a modest rebound from the lowest level since February 25. This has been seen as another factor that has helped the USD / JPY pair to break three consecutive days of losing streak. The pair, for now, appears to have halted its recent pullback from the 109.70 region, although any significant hike seems elusive amid expectations that the Fed will keep interest rates low for a longer period.
Friday’s disappointing monthly U.S. employment report has reaffirmed the Fed’s pessimistic expectations, which could prevent the bulls from opening aggressive positions and limiting the gains of the USD / JPY pair. The NFP showed that the US economy added just 266,000 jobs in April, much lower than estimates that pointed to a reading of almost a million. In addition to this, the prior month’s reading was also revised down to 770,000 from 916,000 and the unemployment rate unexpectedly rose to 6.1% from 6.0% in March.
Therefore, it will be wise to wait for some solid continuation buying before positioning for any further bullish movement. This, in turn, suggests that any subsequent positive movement could still be seen as a selling opportunity and risks fading away fairly quickly amid the absence of relevant market economic releases.
USD / JPY technical levels
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