USD/JPY finds support near 108, consolidates last week's gains
- Trading action remains subdued in the FX markets on Monday.
- US Dollar Index rebounds modestly following last week's drop.
- Markets are likely to stay calm amid the Columbus Day holiday.
The USD/JPY pair gained nearly 150 pips last week despite the broad-based selling pressure surrounding the USD as the upbeat market sentiment weighed heavily on the safe-haven JPY. After closing at 108.42, the pair struggled to preserve its momentum and retreated toward the 108 area before finding support there. As of writing, the pair was down 0.12% on the day at 108.27.
Participants stay focused on trade headlines, Brexit developments
Last week, expectations of the United States (US) and China reaching a partial trade agreement and heightened hopes of a Brexit deal between the European Union (EU) and the United Kingdom (UK) allowed risk-on flows to take control of the market action and hurt the demand for the JPY. Meanwhile, the US Dollar Index also seems to be taking advantage of the shift in the risk perception, adding 0.17% on the day at 98.50 and keeping the pair's losses limited.
However, the lack of details on the US-China "phase-one deal" and reports over the weekend suggesting that a Brexit deal is not as close as initially thought caused the market sentiment to turn sour on Monday and forced the pair to erase a portion of last week's rally.
In the second half of the day, the trading conditions are likely to remain thin with the US observing the Columbus Day holiday. In the early trading hours of the Asian session on Tuesday, Bank of Japan Governor Kuroda will be delivering a speech.
Technical levels to watch for