• USD/JPY flat-lined around 107.25-30 region, risk-off mood capping gains

    • USD/JPY struggled to capitalize on the previous day’s goodish intraday positive move.
    • Risk-off mood underpinned the safe-haven JPY and capped the upside for the major.
    • Some follow-through USD buying extended support and helped limit deeper losses.

    The USD/JPY pair bounced around 20 pips from session lows and was last seen trading in the neutral territory, around the 107.30 region.

    A combination of diverging forces failed to assist the pair to capitalize on the previous day’s goodish intraday positive move of around 50 pips and led to a subdued/range-bound price action through the early European session. The US dollar gained some follow-through traction and extended some support to the USD/JPY pair, rather attracted some dip-buying near the 107.10 region.

    However, the prevalent risk-off mood underpinned demand for the safe-haven Japanese yen and kept a lid on any strong gains for the major. The global risk sentiment took a knock in the wake of renewed concerns about escalating US-China tensions. This coupled with fresh coronavirus restrictions in California further drove flows towards traditional safe-haven assets.

    It is worth reporting that the US State Department on Monday rejected China’s territorial claims in the South China Sea. The US Secretary of State Mike Pompeo accused China of using intimidatory tactics against other claimant states. This drew an angry response from Beijing, which claimed that the US was trying to inflame tensions in the disputed waters.

    Meanwhile, the ever-increasing COVID-19 cases overshadowed the latest optimism over the treatment of the highly contagious disease and further dented investors’ appetite for perceived riskier assets. The risk-off mood was reinforced by a fresh leg down in the US Treasury bond yields, which might further hold investors from placing any bullish bets and cap gains for the USD/JPY pair.

    Market participants now look forward to the US economic docket, highlighting the release of the latest consumer inflation figures. The data, along with the broader market risk sentiment will influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

    Technical levels to watch


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