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  • USD/JPY gained traction for the third consecutive session and shot to over one-week tops.
  • The underlying bullish tone, rallying US bond yields remained supportive of the move up.
  • The USD bulls remained on the defensive, albeit did little to hinder the positive momentum.

The USD/JPY pair maintained its bid through the first half of the European session and was last seen trading just above the 106.00 mark, or over one-week tops.

The pair built on this week’s goodish rebound from levels below the key 105.00 psychological mark and gained some follow-through traction for the third consecutive session on Thursday. The momentum was exclusively sponsored by the underlying bullish sentiment in the financial markets, which tends to undermine demand for the safe-haven Japanese yen.

Investors remain optimistic about a strong global economic recovery amid the impressive pace of COVID-19 vaccinations and the progress on a massive US fiscal spending plan. House Majority Leader Steny Hoyer said that the House will vote on the US President Joe Biden’s proposed $1.9 trillion pandemic relief package on Friday or over the weekend.

In other developments, the US Food and Drug Administration said that Johnson & Johnson’s one-dose COVID-19 vaccine appeared safe and effective in clinical trials. The regulator could grant emergency use approval by the end of this week. Adding to this, Fed Chair Jerome Powell’s dovish comments provided an additional boost to the global risk sentiment.

Bulls further took cues from a fresh leg up in the US Treasury bond yields. The reflation trade, along with rising inflation expectations pushed the yield on the benchmark 10-year US government bond beyond 1.40% for the first time since February 2020. This, in turn, helped offset a softer tone surrounding the US dollar and remained supportive.

Market participants now look forward to the US economic docket, highlighting the release of the second estimate (Prelim) of Q4 GDP print and Durable Goods Orders data. Apart from this, speeches by influential FOMC members will influence the USD price dynamics. This, along with the broader market risk sentiment, might produce some trading opportunities around the USD/JPY pair.

Technical levels to watch

 

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