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  • USD/JPY regained positive traction on Monday and recovered the previous session’s losses.
  • The risk-on mood undermined the safe-haven JPY and remained supportive of the move up.
  • Rallying US bond yields benefitted the USD and provided an additional boost to the major.

The USD/JPY pair maintained its bid tone through the mid-European session, with bulls still awaiting a sustained move beyond the very important 200-day SMA. The pair was last seen holding above mid-105.00s, up around 0.20% for the day.

Following Friday’s pullback from three-month tops, around the 105.75 region, a combination of supporting factors assisted the pair to regain positive traction on the first day of a new week. The prevalent upbeat market mood undermined the safe-haven Japanese yen, while the continuation of the recent rally in the US Treasury bond yields benefitted the US dollar.

The global risk sentiment remained well supported by hopes for a strong economic recovery amid the progress in coronavirus vaccinations and the likelihood for a massive US fiscal spending. In fact, the US Senate approved a budget resolution to fast track President Joe Biden’s proposed $1.9 trillion coronavirus relief plan to be approved without Republican support.  

Meanwhile, the risk-on flow, along with expectations for a larger government borrowing to fund the stimulus pushed the yield on the benchmark 10-year US bond to the highest level in nearly one year. This helped the USD to reverse Friday’s post-NFP losses, which, in turn, inspired bullish traders and was seen as another factor that provided an additional lift to the USD/JPY pair.

It, however, remains to be seen if bulls are able to capitalize on the move or the USD/JPY pair continues with its struggle to find acceptance above the 200-day SMA. In the absence of any major market moving economic releases, it will be prudent to wait for some follow-through buying beyond Friday’s swing high, around the 105.75 region, before placing fresh bullish bets.

Technical levels to watch