- USD / JPY rose for the second day in a row, although it lacked tracking.
- Risk appetite undermined the safe haven JPY and continued to support the move.
- Falling US bond yields weighed on the USD and kept any significant gains in check.
The pair USD/JPY it maintained its offered tone heading into the American session, although it struggled to find acceptance or build on the momentum beyond 114.00.
The pair was based on the overnight bounce from the 113.40 zone, marking an ascending trend line support extending from September lows, and gained some traction on Tuesday. This marked the second day in a row of a positive move and was sponsored by the prevailing climate of risk appetite, which tends to undermine the Japanese yen as a safe haven.
The rally, however, lacked bullish conviction amid the surge in new selling around the US dollar, weighed down by an extension of the recent decline in US Treasury yields. The 10-year US government bond has now fallen closer to 1.60%, although aggressive expectations from the Fed should act like a tailwind.
Fed Chairman Jerome Powell reaffirmed on Friday that the US central bank is still on track to begin reducing its bond purchases by the end of this year. Markets have also been weighing the possibility of a possible interest rate hike in 2022 amid concerns that the recent widespread rebound in commodity prices will fuel inflation.
The fundamental backdrop appears to be tilted in favor of bullish trading and supports the prospects for additional earnings. That said, investors are likely to refrain from aggressive bets ahead of Thursday’s Bank of Japan policy meeting and Q3 advanced GDP report. This, in turn, warrants some caution for aggressive bull traders.
Market participants are now looking forward to the US economic record, featuring the releases of the Conference Board Confidence Index, Richmond Manufacturing Index and New Home Sales. This, coupled with US bond yields and broader market risk sentiment, should help traders seize some short-term opportunities around USD / JPY.
Technical levels
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