- USD / JPY gained some traction for the second session in a row on Monday.
- Expectations that the Fed will sound less dovish prompted a short hedging move.
- The fall of lUS bond yields kept USD bulls on the defensive and could limit gains.
The pair USD/JPY it reversed an intraday drop to the 109.60 region and has now risen to the upper end of its daily trading range heading into the North American session. The pair was last seen hovering around the 109.75-80 region, rising more than 0.10% on the day.
The pair gained some positive traction for the second session in a row on Monday and is now looking to take advantage of last week’s good bounce from the 109.20 area, or support of the 50-day SMA. This also marked the fourth day of a positive move in the previous five and did not appear to be affected by a moderate action in the price of the US dollar.
The market may have already started pricing in a slightly less dovish Fed in the face of mounting inflationary pressures. It is worth remembering that the pace of inflation in the US rose to a 13-year high in May. This, in turn, appeared to have led traders to lighten their bearish bets around the USD / JPY pair.
Apart from this, the underlying bullish sentiment in financial markets undermined the safe-haven Japanese yen and extended some additional support to the USD / JPY pair. That said, a softer tone around US Treasury yields could prevent bulls from making aggressive bets and limit any further gains.
There is no major market-moving economic data released in the US on Monday. Investors may also prefer to wait on the sidelines before the FOMC meeting on June 15-16. This makes it more prudent to wait for a few subsequent purchases before positioning yourself for any further appreciation moves.
From a technical perspective, sustained strength beyond the key psychological 110.00 mark could be seen as a new trigger for bullish traders and pave the way for additional gains. The USD / JPY pair could accelerate the move higher and rise again to test the monthly swing highs, around the supply zone of 110.30-35.
Technical levels
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