USD / JPY recovers the initial drop and rises towards 104.20, the rise seems limited

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  • Softer risk sentiment benefited the safe haven JPY and put some pressure on the USD / JPY.
  • A combination of factors helps the pair to reverse the intraday decline below 104.00.
  • Hopes for fiscal stimulus in the US could continue to weigh on the USD and limit the pair’s gains.

The pair USD / JPY has recovered from an initial drop to the 103.95 region and now it rises back to the daily high zone, around the 104.20 level, at the start of the European session on Monday.

The pair has been unable to capitalize on the good positive move on Friday and has witnessed a modest pullback during the early part of the trading action on the first day of a new trading week. A slight deterioration in global risk sentiment has fueled some safe-haven flows to the Japanese yen, which in turn has been considered a key factor that has put some pressure on the USD / JPY pair.

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Asian stock markets fell back on Monday after Reuters reported that The United States was preparing sanctions for at least a dozen Chinese officials. The move stems from its alleged role in China’s disqualification of Hong Kong-elected opposition lawmakers. However, optimism about the launch of a vaccine for COVID-19 has helped limit the decline in the USD / JPY pair.

The pair has quickly reversed the intraday slide below 104.00 and has been further supported by a modest pickup in demand for the US dollar.. Meanwhile, expectations that US lawmakers agree to a new coronavirus relief program should constrain the dollar, so it is prudent to wait for some continuation buying before positioning for any further upward movement in the USD / JPY pair.

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There is no major economic data release other than from the United States on Monday. Therefore, investors are likely to be guided by the broader market risk sentiment and USD price dynamics. Aside from this, the US stimulus news could also generate some significant business opportunities.

USD / JPY technical levels


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