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USD/JPY struggles to gain traction, stays flat near 109.70

  • 10-year US Treasury bond yield is down nearly 3% on Monday.
  • US Dollar Index looks to post daily gains for sixth straight day.
  • IMF says BoJ lost its credibility on over-optimism in hitting inflation target of 2%.

Despite the broad-based USD strength, the USD/JPY pair is having a difficult time gaining traction during the American trading hours as the market mood allows the JPY to stay resilient. As of writing, the pair was trading at 109.70, where it was virtually unchanged on a daily basis.

The 10-year US Treasury bond yield is down nearly 3% on Monday, making it difficult for the positively-correlated USD/JPY pair to turn north. On the other hand, Wall Street's main indexes, which started the day in the negative territory, are adding between 0.2% and 0.6% to reflect a mixed risk sentiment.

In the meantime, the International Monetary Fund (IMF) in its staff report said the Bank of Japan's over-optimism in hitting the 2% inflation target hurt the bank's credibility. "The BOJ should clarify that it is not excessively focused on inflation, but that other objectives, including financial stability, also matter for monetary policy," the IMF said. 

USD preserves bullish momentum

The poor performance of the EUR is helping the greenback continue to find demand as there were no macroeconomic data releases from the US on Monday. With the US Dollar Index climbing to its highest level since early October at 98.88, the pair's downside remains limited. 

San Francisco Federal Reserve Bank President, Mary Daly, argued that lower policy rate and lower inflation would give the Fed less policy space to combat the next economic downturn but was largely ignored by the market participants. At the moment, the US Dollar Index is up 0.15% on the day at 98.85.

Technical levels to watch for

 

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