A number of factors conspired against USD/JPY capitalizing on its recent gains.
The chances of an earlier Fed rate hike dwindling kept USD bulls on the defensive.
The safe-haven JPY benefited from a milder risk tone, which helped to cap the major.
The USD/JPY pair struggled to take advantage of its small intraday gain, and was last seen hanging around the 111.00 mark heading into the European session.
During the early part of Monday’s trading, the pair halted the previous session’s post-NFP retracement decline from 15-month highs and crept upward. The increase, however, lacked a sufficient follow-through and was capped amid a weakening US currency.
The contents of the US jobs report soothed fears of an earlier Fed rate hike, acting as a headwind for the dollar. The headline NFP data revealed that the US economy added 850K jobs in June, but the strong performance was tempered by an unexpected increase in the unemployment rate.
A lower risk tone, on the other hand, provided some support to the safe-haven Japanese yen and helped to cap the USD/JPY pair. Investors also were hesitant to make any aggressive bets due to the lack of liquidity following the US vacation.
Moving forward, attention will turn to the release of FOMC meeting minutes, which will be scrutinized for signals regarding the central bank’s monetary policy outlook. This will be crucial in boosting the USD in the near term and giving the USD/JPY pair a new lease on life.
Meanwhile, the USD/JPY pair will be influenced by broader market risk sentiment, allowing traders to profit from short-term chances. Investors may want to stay on the sidelines ahead of the key event risk, thus momentum is likely to be limited./n
