Still Under a Low

The USD/JPY currency pair retained its top biding tone throughout the first part of the European session. It was observed to trade close to its daily high point. The daily high happens to be right under the mid-130.00 area.

USD/JPY price chart. Source TradingView

A conglomeration of many conditions came together to support the USD/JPY currency pair to draw new purchases to itself. The first trading day of the week was set for it to pull back some part of the retracement falls that occurred on Friday.

Attendant indications of stability that came into the stock markets did not advance the course of the Japanese Yen. The Asian currency got more bogged down by the dovish outlook of the Bank of Japan. 

It should be noted that for some weeks now, the Bank of Japan has held on to its very loose monetary policy. It does so to defend the currency and protect against the rise of long-term interest rates. The central bank promised that it would carry out daily efforts to protect its almost zero aim for the ten-year bond’s yield. 

FOMC, USD Dynamics

On the flip side, the market’s assurance that the US Federal Reserve is going to fasten its overall monetary policy. The more rapid rate that is expected to fight the escalating daily inflation keeps being supportive of increased US Treasury bond yield. The resultant effect of this is an increased divergence in the policy outlook. 

Eventually, it widens the difference in the government’s bond yield between Japan and the US. It has become yet another condition that diverted funds away from the Japanese Yen. 

These facts gave more support to the USD/JPY currency pair. So did the resurgence of a new set of purchases for the US Dollar.  Bullish traders have, however, stayed away from staking new aggressive bets. Even though major events and data releases are coming up later this week.

It looks like investors would prefer that they wait for the result of the two-day Federal Open Market Committee monetary policy meeting. It is scheduled to begin on Tuesday before they make any decisive moves. The Federal Reserve is set to make its decisions public on Wednesday. It is generally expected that it will raise interest rates by 50 basis points.

This week, it is expected that traders will take a cue from significant major US data releases. They are set to be out at the start of a new month. These are going to include the closely monitored monthly employment report. Popularly referred to as the Non-Farm Payroll (NFP).

While waiting for that, the US Manufacturing Purchasing Managers’ Index might give some necessary impetus. The USD/JPY currency pair would need such when the North American session is set in motion. 

The pair had a lot of meandering in the month of April. Investors are now eagerly looking forward to a better time and much stability as a new month commences.