USD/JPY advances to fresh multi-month highs above 109
- 10-year US Treasury bond yield is up more than 3% on Monday.
- Wall Street rises on hopes of US and China finalizing phase one of the trade deal.
- US Dollar Index moves sideways ahead of this week's FOMC meeting.
The USD/JPY pair spent the previous week moving sideways in an extremely tight range near the 108.50 mark and stayed relatively quiet during the first half of the day on Monday before gaining traction during the American trading hours. Boosted by the upbeat market mood, the pair rose to its highest level since early August at 109.04 and was last seen trading at 109, adding 0.3% on a daily basis.
Risk-on flows return on Monday
US President on Monday said that they were "ahead of schedule" with regards to finalizing the phase one of the trade agreement with China and stated that they were expecting to sign it at the APEC summit in Chile in November.
The 10-year US Treasury bond yield rose sharply following these comments and Wall Street's main indexes started the day with decisive gains with the S&P 500 Index touching a fresh all-time high to reflect the risk-on mood, which made it difficult for the safe-haven JPY to find demand. As of writing, the 10-year US T-bond yield was up 3.3% on the day.
On the other hand, the Greenback is staying quiet ahead of Wednesday's crucial Federal Open Market Committee (FOMC) meeting and allowing the risk perception to drive the pair's movements.
Previewing the FOMC event, "A rate cut from the Fed looks a done deal this week as it takes out more insurance against elevated external risks,” said ANZ analysts. "We expect the FOMC to cut its target rates by 25bp at the October meeting, which would be its the third successive rate cut. This would take policy slightly more accommodative. We think the move is justified in light of the data pulse since the 17–18 September meeting."
Technical levels to watch for