- A combination of divergent factors fails to provide a significant boost to USD / JPY.
- The Fed’s pessimism keeps USD bulls on the defensive and limits the pair’s rally.
- Risk appetite, COVID-19 nerves and softer data weigh on the JPY and help limit the pair’s losses.
The pair USD/JPY it lacks a firm directional bias and oscillates between slight gains and minor losses during the first half of trading action on Monday. At the time of writing, the pair is trading around the region of 109.75, practically unchanged on the day at the start of the European session.
The pair has seen some selling on the first day of a new trading week and has continued to move away from the highest level since April 6, around the 110.20 region touched on Friday. Despite stronger US inflation data, the Fed’s stubbornly pessimistic view that recent price pressures are temporary they should calm investors’ nerves. This has been evident by a sharp pullback in US Treasury yields, which has acted as a headwind for the US dollar and led to some selling around the USD / JPY pair.
Having said that, a combination of factors has prevented investors from opening aggressive bearish positions and it has helped limit deeper losses in the pair, at least for the moment. Underlying bullish sentiment in financial markets has continued to weigh on the safe-haven Japanese yen, which has been even more affected by the weaker data in the country. In fact, Japan’s industrial production rose 2.5% month-on-month and retail sales rose 12.0% year-on-year in April, although the figures were well below previous estimates.
The data is produced after Japan has extended the state of emergency in Tokyo and eight other prefectures in about 3 weeks until June 20. This, in turn, has validated market concerns that the recent surge in COVID-19 cases could hamper Japan’s fragile economic recovery, keeping JPY bulls on the defensive and offering some support to the USD / JPY pair. Investors also appear reluctant, preferring to wait on the sidelines amid relatively tight liquidity conditions due to a public holiday in Britain and the United States. This has been seen as another factor that has contributed to moderate and limited price action within a range.
USD / JPY technical levels
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