USD/JPY with modest losses below 105.50

The USD/JPY pair has hit daily lows around the 105.25 regions at the start of the European session on Monday. However, it has lacked a solid track and has quickly rallied a few pips. The pair is holding modest losses around the 105.35 level.

The USD/JPY has been unable to capitalize on its initial rally to the 105.70 regions and has witnessed a modest pullback on the first day of a new trading week. The pair, for now, seems to have broken five consecutive days of winning streak. The drop is due to a softer tone around the US dollar.

Investors remain concerned that the current US economic recovery may falter in the absence of new fiscal stimulus measures. Besides, there is political uncertainty in the run-up to the November US presidential election. It has led to some profit-taking in the United States dollar and has put pressure on the USD/JPY pair.

However, as shown by a strong rally in US equity futures, prevailing upbeat sentiment in the market has weighed on demand for the safe-haven Japanese yen. It helped limit more profound losses for the future. Therefore, analysts think it will be reasonable to wait for a solid sales continuation before positioning for further decline. 

Donald Trump and Joe Biden will face each other in presidential debates

In the absence of significant economic releases from the US, overall market risk sentiment and USD price dynamics will play a vital role in influencing momentum in the pair. However, the key focus of attention will be on the first presidential debate. Donald Trump and Joe Biden will go head-to-head in three discussions in the coming weeks. The initial debate kicks off tomorrow, on Tuesday. The three broadcasted debates are likely to be the only times the two presidential candidates appear alongside each other. It could instill some volatility in the currency market.