- USD/JPY attracts some buying on Monday and is supported by a combination of factors.
- Risk appetite weighs on the JPY and benefits the pair amid a rally in US bond yields.
- The selling trend around the USD prevents the bulls from opening aggressive positions and limits the rise of the pair.
The pair USD/JPY has regained some of the ground lost initially to an intraday low at 127.15 and now trading around 127.50still down 0.30 on the day.
A combination of supportive factors helped the USD/JPY pair to attract some buying in the area of ​​127.15 on Monday, although the modest weakness of the US dollar prevented it from advancing further. A positive tone in equity markets weighed on the safe-haven Japanese yen and extended support for the pair.. Risk appetite was bolstered by a nice rally in US Treasury yields, which further inspired bulls and acted as a tailwind for the pair.
Besides, the dollar fell to its lowest level in two and a half weeks, as markets appear to have fully priced in a Fed rate hike of at least 50 basis points in the next two meetings. This, in turn, prevented the bulls from opening aggressive positions around the USD/JPY pair. Additionally, the worsening global economic outlook limited bullish market movement, which in turn warrants some caution before positioning for a significant rise in the pair.
Investors continue concerned that more aggressive action by major central banks to curb inflation could challenge global economic growth. Additionally, the war between Russia and Ukraine and prolonged COVID-19 lockdowns in China have fueled recession fears. That said, a wide divergence in the monetary policy stance adopted by the Fed and the Bank of Japan should continue to help limit any deeper losses for the USD/JPY pair, at least for now.
In the absence of any major economic releases, dollar dynamics coupled with US bond yields will play a key role in the intraday momentum of the USD/JPY pair. Aside from this, investors will take cues from the broader market risk sentiment to take advantage of some short-term opportunities on Monday.
USD/JPY technical levels
Source: Fx Street
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