USDJPY begins with a minor bearish gap, but there is little follow-through selling.
On the first day of a new week, the USDJPY pair struggles to benefit on Friday’s upward move, opening with a minor negative gap. Spot prices, on the other hand, manage to recover a few pips from sub-149.00 levels. Or the daily low, despite a lack of follow-through in the aftermath of growing geopolitical tensions in the Middle East. Which tends to boost the safe-haven Japanese Yen (JPY).
Rising geopolitical tensions in the Middle East favor the USDJPY while exerting some pressure.
In Gaza, Palestine, the Hamas armed organization launched an attack against Israel. On Saturday, communities joined together in an unprecedented step. In response, Israel started airstrikes on Gaza and declared war on the Palestinian territory on Sunday. Killing hundreds on both sides. This, in turn, weighed on global risk sentiment. And prompted some refuge flows to the JPY.
This, together with muted US Dollar (USD) price activity, is considered. As a bearish sign for the USDJPY pair.
The economy added 336K jobs in September. Above even the most optimistic predictions. According to Friday’s mixed US monthly jobs report (NFP). In addition, the prior month’s estimate was raised up to 227K from 187K. Indicating that the labor market remains tight. As a result, bets for at least one more rate are reaffirmed. The Federal Reserve (Fed) is expected to raise interest rates before the end of the year, which will sustain rising US Treasury bond yields and offer some support to the USD.
In the face of intervention worries, the USD’s price movement has been subdued.
Meanwhile, the report’s further data indicated that pay growth remained low throughout the reported month, alleviating inflationary fears. This, in turn, prevents USD bulls from placing new wagers, limiting the pair’s upward potential. Traders are hesitant as well, preferring to remain on the sidelines ahead of the release of the FOMC monetary policy meeting minutes on Wednesday, followed by the latest US consumer inflation statistics on Thursday.
Meanwhile, expectations that the Japanese government may interfere in the FX market to support the home currency contribute to the cap. The USDJPY pair has gained ground. Indeed, Japan’s senior currency ambassador, Masato Kanda, cautioned last week that sustained JPY declines might need intervention. Former senior currency diplomat Naoyuki Shinohara, on the other hand, believes Japan would not strive to reverse the JPY’s downturn because the falls reflect economic realities.
In the absence of any market moving economic news on Monday, the mixed backdrop deserves some caution for aggressive traders and may cause the USDJPY pair to continue its price action.
