USD / JPY remains confined to a range below 114.00

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  • USD / JPY witnessed moderate / in-range price action on the first day of a new week.
  • Risk appetite boost, disappointing GDP undercut the JPY and offered some support.
  • Falling US bond yields weighed on the USD and kept any significant gains in check.

The pair USD/JPY it balanced between tepid gains / minor losses and remained confined to a range below 114.00 heading into the American session.

A combination of divergent forces failed to provide significant momentum to the USD / JPY pair and led to moderate / in-range price action on the first day of a new week. The risk appetite boost in equity markets undermined the safe-haven Japanese yen, which was further weighed down by Monday’s disappointing GDP figure for Japan.

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The preliminary estimate showed that the economy contracted more than expected, 0.8% in the three months to September and 3.0% on an annualized basis. This, in turn, was seen as a key factor that extended some support to the USD / JPY pair, although a further pullback in the US dollar from the 16-month highs hit on Friday acted as a headwind.

The University of Michigan survey released on Friday showed that US consumer confidence fell to a 10-year low in November. This, coupled with a further downward leg in US Treasury yields, kept USD bulls on the defensive and limited the rise in the USD / JPY pair. That said, aggressive expectations from the Fed helped limit USD losses.

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In fact, markets have been weighing the possibility of an eventual Fed rate hike in July 2022. Additionally, Fed fund futures indicate a high probability of another hike for November amid concerns about rising inflationary pressure. This, in turn, supports the prospects for some falling buying around USD / JPY.

This, in turn, warrants some caution before confirming that the hotter-than-expected US CPI-inspired rally has worn off and has made aggressive bearish bets. Market participants are now looking forward to the US economic agenda, featuring the only release of the Empire State Manufacturing Index, to give the USD / JPY a boost.

Traders will follow the signals of US bond yields, which could influence USD price dynamics. Apart from this, the broader market risk sentiment will drive demand for the safe haven JPY and further contribute to producing some significant trading opportunities around the USD / JPY pair.

Technical levels

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