USD/JPY stays calm near 107.30 ahead of Wall Street opening bell
- 10-year US Treasury bond yield erases large part of Friday's recovery gains.
- US Dollar Index drops to multi-month lows near the 96 mark.
- Wall Street looks to open the day with small gains on Monday.
After erasing more than 100 pips and closing the previous week at its lowest level since early January at 107.31, the USD/JPY pair is moving sideways on Monday, waiting for the next significant catalyst. As of writing, the pair was trading at 107.25.
Escalating geopolitical tensions in the Middle East and the uncertainty surrounding the U.S.-China trade conflict helped the JPY find demand as a safer alternative throughout the week last week. More importantly, the FOMC's dovish shift and the sharp fall witnessed in the 10-year Treasury bond yields allowed the bearish pressure to remain intact.
Although the 10-year T-bond yield, which staged a technical correction last Friday, is now losing more than 1.5% on Monday, the pair seems to be taking a break amid the technically oversold conditions. Furthermore, the S&P 500 Futures is up 0.2% on the day to hint at a positive start in Wall Street, which could make it difficult for the JPY to continue to gather strength in the remainder of the session.
On the other hand, ahead of the Chicago Fed's National Activity Index and the Dallas Fed Manufacturing Index, the US Dollar Index testing the 96 mark, revealing that investors continue to price Fed rate cut expectations and suggesting that any recovery attempts are likely to remain shallow amid the dismal tone surrounding the buck.
Technical levels to watch for