- USD/JPY witnessed some selling for the second successive session on Monday.
- Powell downplayed speculations for an early rate hike and weighed on the USD.
- Bears further took cues from the ongoing decline in the US Treasury bond yields.
The USD/JPY pair remained depressed heading into the European session and was last seen trading near three-day lows, around the 109.75-70 region.
The pair extended Friday’s sharp retracement slide from the 110.25 region, or two-week tops and edged lower for the second consecutive session on Monday. The US dollar was being weighed down by diminishing odds for an earlier than anticipated Fed rate hike, which, in turn, was seen as a key factor exerting pressure on the USD/JPY pair.
During the highly-anticipated speech at the Jackson Hole Symposium, Fed Chair Jerome Powell reassured that the US central bank was in no hurry to raise interest rates. Powell also warned of the downside risks posed by the rapid spread of the delta variant, which warrants policymakers to carefully assess the incoming economic data.
The market was quick to react, which was evident from the ongoing decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond dropped back closer to the 1.30% threshold during the early part of the trading action on Monday. This further undermined the USD and added to the selling bias around the USD/JPY pair.
That said, the underlying bullish sentiment in the financial markets acted as a headwind for the safe-haven Japanese yen and helped limit any further losses for the USD/JPY pair, at least for now. Market participants now look forward to the release of Pending Home Sales data from the US for some impetus later during the early North American session.
The key focus, however, will be on this week’s other important macro data scheduled at the beginning of a new month, including the closely-watched US monthly jobs report (NFP) on Friday. In the meantime, the broader market risk sentiment, the US bond yields and the USD price dynamics might assist traders to grab some short-term opportunities.
Technical levels to watch