USD/JPY attempts recovery above 109.50 after USD U-turn

• USD/JPY makes a slow start on Monday after a heavy sell-off in the previous week.
• US Dollar Index descends below 93.00 on fragile consumer sentiment.
• The yen manages on broader USD weakens despite failure to handle fresh coronavirus infection wave and slower vaccination drive.

The intense selling pressure in the US dollar keeps gains limited for USD/JPY in the initial Asian trading hours. After making a high near 110.90, the pair lost all the gains in a single day, with a sharp decline of almost 100-pips.

At the time of writing, USD/JPY is trading at 109.64, up 0.06 % for the day.

The US Dollar Index, which tracks the performance of the greenback against its six major rivals, trades near  92.50 with 0.56% losses on the back of falling US Treasury yields.

The 10-year Treasury yield skid below 1.30% following the weaker US consumer sentiment, which plummeted to its lowest level since December 2011 as per the data from the University of Michigan.

The University of Michigan Consumer Sentiment dropped 13% in July to 70.2 against the market expectations of 81.3 rise.
 
Investors remained pessimistic about the greenback on the weaker data, which signifies lingering concerns on the rapid increase of the delta variant and its impact on the global economic recovery.

Meanwhile, the geopolitical unrest in Afganistan, where the Taliban took over the control and President Ashraf Ghani fled the capital, added weight to the attractiveness of the greenback amid the turmoil.

In addition to that, a poll conducted by Reuters revealed 28 of 43 economists predicted tapering announcements by Fed in September, this indeed provides some lower support to the USD.

On the other hand, the Japanese yen appreciated its safe-haven appeal amid a sell-off in the US dollar. However, the gains are not much lived as the Health experts in Japan warned of upcoming coronavirus “disaster” and urged the government to take stern action to confide infections.

As for now, investors wait for the Japanese GPD data, Industrial Production data to gauge the market sentiment.

USD/JPY additional levels