- Optimistic market sentiment has eroded the JPY refuge and helped the USD / JPY regain strength.
- The current sale in USD could cap the gains, which justifies a certain prudence before placing bullish bets.
- A sustained movement beyond the 108.00-108.10 region was to confirm any short-term bullish bias.
The USD / JPY pair rose slightly during the mid-European session and was last seen hovering around daily highs near the 107.80-85 region.
After yesterday’s bidirectional price movements, the pair managed to regain positive traction on Tuesday and tested the upper end of a two-week trading range. Optimistic market sentiment has eroded demand for a safe haven Japanese yen and has proven to be one of the main factors driving the pair higher.
The sense of global risk has been well supported by recent optimism about the easing of lock restrictions around the world, which has fueled hopes for a V-shaped recovery for the global economy. This, in turn, more than offset fears of deteriorating relations between the United States and China.
It should be recalled that Monday’s report indicated that China had ordered state-owned agricultural enterprises to suspend purchases of certain US agricultural products, including soybeans. The report further notes that China has cut off US imports of cotton and corn, while some pork purchases have also been delayed.
On the other hand, the downward pressure surrounding the US dollar has remained unchanged following widespread protests in dozens of American cities following the death of George Floyd. A general weakness of the USD prevented the bulls from getting aggressive and could limit the solid gains of the USD / JPY pair.
There are no significant economic data on the market expected to be released on Tuesday, leaving the pair at the mercy of USD price dynamics / the broader sense of market risk. Therefore, it will be prudent to wait for solid follow-up purchases, perhaps beyond the 108.00-108.10 region, before positioning yourself for further near-term appreciation.