On Monday, USD/JPY remained generally stable around the mid-113.00s. Karen Jones, Team Head Fundamental Analyst Researcher at Commerzbank, observes that a breach below 113.26 would open the door to a possible decline to the July high of 111.66. The USD/JPY is stabilizing over 113.26, it is on the defensive, and it appears to be getting progressively sluggishly.
If a closing below the 113.26 low points is seen, a steeper sell-off to 112.56, the 38.2 % retracement level, and maybe the 111.66 July peak, would be permitted. Somewhere above the 113.26 holds, the scope for 114.55/69, the November 2017 and recent highs, will remain. Over 114.55/69, the next resistance level is 115.60, which is the 61.8 percent retracement of the decline from 2015, followed by 117.06, the 1998-2021 support line.
On Monday, the USD/JPY recovered some positive momentum, but the pair lacked certainty in the bullish direction. The recovering yields on US government bonds proved to be a significant element in providing some assistance. In the context of a conservative market environment, a reduced USD demand could limit the major’s gains.
USD/JPY CHART Source: Tradingview.com
When trading resumed in the European session, the USD/JPY pair continued its bullish stance and was last seen moving near day highs, slightly over the mid-113.00s. On the first market day of the current trading week, the cross drew some dip-buying and regained a significant portion of Friday’s dips to the 113.30-25 diagonal support level. The strengthening of the US Dollar was aided by a decline in the yields on US Treasury bonds, which proved to be a significant factor in the strengthening of the USD/JPY pair.
Overview Of The Fundamentals
The positive Nonfarm Payroll Report (NFP) from the United States, which revealed that the economy added 531K jobs in October, added further strength to the Dollar. Furthermore, statistics for the preceding months were revised upward to reflect a further 235,000 jobs, while the Federal Reserve’s dovish stance limited the Dollar’s ability to rise further.
The Federal Reserve of the United States said this week that it would reduce its monthly bond-buying by $15 billion, as had been widely anticipated, and that the inflation is only temporary. In a news conference following the meeting, Federal Reserve Chairman Jerome Powell stated that authorities were not in a rush to raise borrowing costs.
However, a cautious market environment may provide some assistance to the relatively secure Japanese Yen and hold any runaway rebound in the USD/JPY pair at bay, at least for the moment being. This in turn calls for some caution on the part of bullish traders, as well as preparation for any significant appreciation movement. The United States is not expected to reveal any significant market-moving economic data on Monday, putting the Dollar at the whim of the yields on US Treasury bonds. Powell’s statements at an online conference later in the US session may have an impact on the USD and provide some trading momentum to the USD/JPY pair.