- USD / JPY regained some positive traction on Monday amid declining demand for a safe haven.
- Optimistic Chinese PMI impressions remained supportive of the prevailing risk environment.
- The Fed’s dovish signal last week could prevent bulls from placing new bets and cap the upside.
USD / JPY rose slightly at the start of the European session and was last seen hovering near the high end of its daily trading range, around the 105.75 region.
The pair caught new offers on the first day of a new trading week and recovered some of the previous session’s steep intraday rejection decline of over 175 pips in the 107.00 neighborhood. The upward movement was supported by the prevailing risk mood, which tends to undermine the safe haven Japanese yen.
Already stronger global risk sentiment received a further boost on Monday following the release of better-than-expected Chinese manufacturing and services PMI impressions. The Japanese yen has been further put under pressure by expectations that the next Japanese leader will continue the “Abenomics” economic stimulus program.
On the flip side, the US dollar was seen consolidating the heavy losses of the past week following accommodating signals from Fed Chairman Jerome Powell at the Jackson Hole Symposium. Moderate demand for USD could prevent investors from placing aggressive bullish bets and prevent USD / JPY from attempting to recover.
In his opening speech at the Jackson Hole Symposium, Powell said on Thursday that the Fed was ready to allow inflation to exceed the 2.0% target to support the labor market and the economy in general. . This, combined with a lower tone surrounding US Treasury bond yields, kept bulls in the USD on the defensive.
No major economic data on market developments are due for release from the United States on Monday. It is therefore prudent to wait for solid follow-up buys before positioning for further intraday gains. Conversely, sustained weakness below the horizontal 105.40 area will be seen as a new trigger for bearish traders and will make the USD / JPY pair vulnerable to challenge the key psychological mark of 105.00.