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  • A combination of factors assisted USD/JPY to gain traction for the seventh straight day.
  • Rallying US bond yields underpinned the USD and fueling the ongoing bullish momentum.
  • The underlying bullish tone weighed on the safe-haven JPY and remained supportive.

The USD/JPY pair continued scaling higher through the early European session and shot to near three-month tops, around the 105.25 region in the last hour.

The pair prolonged its bullish trajectory for the seventh consecutive session on Thursday and build on the momentum further beyond the key 105.00 psychological mark. The US bond market has reacted strongly amid firming expectations for a massive US fiscal stimulus measures. This, in turn, continued underpinning the US dollar and was seen as a key factor driving the USD/JPY pair higher.

It is worth reporting that Democrats took the first step to advance President Joe Biden’s proposed COVID relief package without Republican support. The Senate began debating a budget resolution for 2021 with coronavirus spending instructions. While it is unclear how much compromise Republicans are willing to make, investors still expect additional spending of at least $1 trillion.

The USD was further supported by Wednesday’s upbeat US economic data, which showed that private-sector employment grew 174K in January as compared to 49K expected. Separately, the employment sub-component of the US ISM services sector report showed a significant increase in the previous month and lifted expectations for the official non-farm payrolls (NFP), due for release on Friday.

Apart from this, the underlying bullish sentiment in the financial markets weighed on the safe-haven Japanese yen and provided an additional boost to the USD/JPY pair. That said, RSI on the daily chart has now moved closer to overbought territory and warrants some caution for bullish traders. This makes it prudent to wait for some near-term consolidation before any further appreciating move.

Market participants now look forward to the release of the Initial Weekly Jobless Claims data from the US for some impetus later during the early North American session. This, along with the US stimulus headlines, will play a key role in influencing the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some meaningful opportunities.

Technical levels to watch