USD/JPY pares early gains, drops toward 107.30 ahead of Powell's testimony
- USD/JPY lost its traction after climbing above 107.60.
- Wall Street's main indexes look to extend the rally on Tuesday.
- Investors wait for US data and FOMC Chairman Powell's testimony.
The upbeat market, as reflected by impressive gains in global equity indexes, weighed on the safe-haven JPY and caused the USD/JPY pair to advance to a daily high of 107.64. Nevertheless, the pair struggled to preserve its bullish momentum and erased its daily gains as investors seem to be moving to the sidelines ahead of the American session. As of writing, the pair was flat on the day at 107.30.
Market sentiment remains the primary market driver
On Monday, the US Federal Reserve announced that it expanded its purchases of corporate bond in the secondary market to further support the economic activity. Boosted by the development, the 10-year US Treasury bond yield rose more than 2% on Monday and Wall Street's main indexes closed in the positive territory after starting the day deep in the red.
Risk-on flows seem to be continuing to dominate the financial markets with European major equity indexes rising more than 2% and the S&P 500 futures gaining 1.15%.
In the second half of the day, Retail Sales and Industrial Production data will be featured in the US economic docket. Additionally, Jerome Powell, Chairman of the Federal Reserve, will be testifying on the semiannual monetary policy report before the Senate Banking Committee. Ahead of these important events, the US Dollar Index is posting modest daily gains at 96.65.
Previewing the Retail Sales report, "the consensus forecast for an 8% gain in overall sales, about half the April loss and for a 3.8% rise in the control group, about one-fourth the prior decline, will not be enough to convince markets that the economy is going to outperform expectations," said FXStreet analyst Joseph Trevisani.
Technical levels to watch for