• Edwick Haron

USD/JPY clings to gains near session tops, just above mid-105.00s

  • USD/JPY gained traction on Monday amid fading safe-haven demand.

  • Trump’s health update provided a strong lift to the global risk sentiment.

  • A weaker tone surrounding the USD might keep a lid on any strong gains.

The USD/JPY pair edged higher through the first half of the European trading action and was last seen hovering near the top end of its daily range, around the 105.60-65 region.

The pair caught some fresh bids on the first day of a new trading week and built on the previous day's rebound of around 35 pips from seven-day lows, or levels below the key 105.00 psychological mark. The momentum was sponsored by the upbeat market mood, which tends to undermine demand for the safe-haven Japanese yen.

Positive news about Trump’s coronavirus infection helped eased some of the political uncertainty and boosted investors' confidence. This was evident from a strong rebound in the equity markets, which drove flows from traditional safe-haven assets. Bulls further took cues from a pickup in the US Treasury bond yields.

However, the emergence of some fresh selling around the US dollar might hold bulls from placing any aggressive bets and keep a lid on any runaway rally for the USD/JPY pair. This makes it prudent to wait for some strong follow-through buying beyond the 105.70-75 supply zone before positioning for any further appreciating move.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Non-Manufacturing PMI. The data might influence the USD price dynamics. This, along with the broader market risk sentiment, will assist traders to grab some meaningful trading opportunities on Monday.

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