- Risk aversion benefits the safe haven JPY and triggers further selling around USD / JPY.
- The pullback in US bond yields keeps USD bulls on the defensive and contributes to intraday selling.
- The drop appears supported as the focus shifts to this week’s FOMC monetary policy meeting.
The pair USD/JPY moves lower at the start of the European session on Monday and remains close to its Daily lows around the 110.20-25 region.
The pair has struggled to capitalize on last week’s strong recovery move, from near the 109.00 level, and has found new sales on the first day of a new trading week. A shift in global risk sentiment has benefited the safe-haven Japanese yen and it has turned out to be a key factor that has acted as a headwind for the USD / JPY pair.
Concerns about Possible economic consequences of the Delta variant The fast-spreading coronavirus has weighed on investor appetite for perceived riskier assets. The flow of risk aversion has been reinforced by a decline in US Treasury yields, which has kept the US dollar on the defensive and put additional pressure on the USD / JPY pair.
With the latest move down, the pair has now returned a portion of Friday’s strong gains to more than a week highs, although the decline is likely to continue to be supported. In the absence of major economic releases, investors could refrain from opening aggressive positions, preferring to wait on the sidelines before the FOMC meeting, which begins Tuesday.
The US central bank is likely point out that you are in no rush to reduce your asset purchases or raise interest rates soon. However, the outcome of the meeting will play a key role in influencing USD price dynamics and helping investors determine the next directional move for the USD / JPY pair, justifying caution to bears.
Meanwhile, broader market risk sentiment, developments around the coronavirus saga, and US bond yields will all be seen to get some commercial momentum. Therefore, it will be prudent to wait for a strong continuation sell before positioning for the resumption of the recent pullback from the yearly highs, around the 111.65-touched region earlier this month.
USD / JPY technical levels
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