- Resurgent USD demand helped reverse the bearish gap on Monday.
- The global flight to safety underpinned the JPY and capped gains.
- Focus remains on this week’s key central bank meetings – FOMC & BoJ.
The USD/JPY pair now seems to have entered a consolidation phase and was seen oscillating in a range just below 1-1/2 month tops, set earlier this Tuesday.
Despite the latest escalation of geopolitical tensions in the Middle East, following drone attacks on oil fields in Saudi Arabia, the pair on Monday witnessed a dramatic intraday turnaround and rallied around 70-pips from an early low to levels just below mid-107.00s.
The upside seems capped ahead of FOMC/BoJ
The overnight goodish move up was solely driven by resurgent US Dollar demand and the momentum extended through the early Asian session on Tuesday, albeit investors' reluctance to place aggressive bets ahead of the key central bank meetings capped further gains.
Meanwhile, the fact that surging Oil prices might have raised fears of a global economic slowdown now seemed to underpin the Japanese Yen's safe-haven demand and further collaborated towards keeping a lid on any strong follow-through appreciating move for the major.
However, the fact that the pair has found acceptance above 100-day SMA for the first time since early-May support prospects for an extension of the recent bullish trajectory, though investors are likely to wait for a fresh catalyst from the highly anticipated FOMC decision.
The Fed is widely expected to cut interest rates again at the conclusion of a two-day meeting on Wednesday but opinions on further easing remain divided. This will be followed by the latest BoJ monetary policy update on Thursday, which might further contribute towards determining the pair's next leg of a directional move.
In the meantime, the broader market risk sentiment and the USD price dynamics might continue to influence the price action and contribute towards producing some short-term trading opportunities amid absent relevant market-moving US economic releases on Tuesday.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.