USD/JPY advances above 107 supported by rising US T-bond yields

• US 10-year Treasury bond yield climbs to highest level in more than two weeks.
• Wall Street’s main indexes post modest gains on Monday.
• US Dollar Index continues to move sideways above 98 handle.  

After spending the large part of the day moving sideways near the 107 handle, the USD/JPY pair gained traction during the American trading hours and rose to a daily high of 107.18. As of writing, the pair was up 0.2% on the day at 107.12.

JPY struggles to find demand as a safe-haven

The lack of major developments surrounding the US-China trade conflict and rising optimism about the Chinese economy gathering recovery momentum on the back of additional stimulus from the central bank allowed risk-on flows to dominate the market action at the start of the week.  

Earlier today, Chinese President Xi told the national TV that they will continue to support private firms and Global Times reported that China’s Central Bank was planning to cut the reserve requirement ratio (RRR) one more time before the end of the year to inject more liquidity into the economy.

The 10-year US Treasury bond yield, which closed the previous week in the positive territory, is now up more than 3.5% to reflect the upbeat market sentiment. Additionally, three main indexes of Wall Street are posting modest daily gains.

Meanwhile, the US Dollar Index is moving sideways in a range above the 98 handle on Monday, allowing the risk perception to drive the pair’s price action.  The only data from Japan on Tuesday will be the Machine Tool Orders, which is unlikely to have a significant impact on the JPY.  

Technical levels to watch for