JAPANESE YEN SINKS BELOW 160.00 AGAINST USD, LOWEST SINCE 1986

• The Japanese Yen dives to a nearly 40-year low amid relatively thin liquidity on Monday.
• The divergent BoJ-Fed monetary policy and a positive risk tone weigh heavily on the JPY.
• Intervention fears cap USD/JPY amid a modest USD downtick and overbought conditions.

The Japanese Yen (JPY) remains under heavy selling pressure on the first day of a new week, pushing the USD/JPY pair above the 160.00 psychological mark for the first time since October 1986. A big divergence in the Bank of Japan's policy outlook and hawkish Federal Reserve expectations continue to undermine the JPY amid relatively thin liquidity on the back of a holiday in Japanese markets. That said, extremely overbought conditions and fears about a possible intervention from Japan to prop up its currency help limit further losses. Apart from this, a modest US Dollar (USD) downtick caps gains for the currency pair, though any meaningful JPY appreciation still seems elusive in the wake of the BoJ's uncertain rate outlook. 

Furthermore, the US Personal Consumption Expenditures (PCE) Price Index released on Friday reaffirmed expectations that the Federal Reserve (Fed) will wait until September before cutting interest rates. This should continue to act as a tailwind for the Greenback. Apart from this, a generally positive risk tone could undermine the safe-haven JPY and suggests that the path of least resistance for the USD/JPY pair is to the upside ahead of the crucial two-day FOMC policy meeting starting on Tuesday. Investors this week will also confront the release of important US macro data scheduled at the beginning of a new month, including the closely-watched Nonfarm Payrolls (NFP) on Friday before placing fresh directional bets