In Monday’s European session, USD/JPY approaches the psychological support level of 150.00, driven by a decline in the US Dollar Index (DXY). The broader index, which measures the Greenback’s value against six major currencies, has dipped to around 104.20. Meanwhile, S&P500 futures show subdued activity in the London session due to the extended weekend caused by the Presidents’ Day holiday in US markets. However, 10-year US Treasury yields have rebounded to 4.31%, boosted by higher-than-expected Producer Price Index (PPI) and consumer price inflation data for January.

Market sentiment has seen a shift as traders reduce their expectations for rate cuts at the May monetary policy meeting of the Federal Reserve (Fed). Policymakers view the recent uptick in inflation data as a temporary anomaly rather than a persistent trend, emphasizing the importance of focusing on the broader inflation trajectory.

Looking ahead, investors are keenly awaiting the release of the Federal Reserve (Fed) Open Market Committee (FOMC) minutes from the January policy meeting, scheduled for Wednesday. The minutes will offer insights into the Fed’s decision to maintain the status quo and provide updated guidance on interest rates.

Meanwhile, the Japanese Yen has found support against the US Dollar, although expectations for the Bank of Japan (BoJ) to unwind its expansionary monetary policy stance have diminished. With the Japanese economy slipping into a technical recession, the BoJ is likely to continue expanding stimulus measures to bolster economic growth.

On the economic data front, market participants await the release of preliminary Jibun Bank Manufacturing and Services PMI data for February, which is due on Tuesday.

Trade Idea:

Monitor USD/JPY for potential short positions if it breaches the psychological support level at 150.00, while remaining vigilant for further developments in US inflation data and the Fed’s monetary policy stance.