USD/JPY clings to gains near 10-month tops, around 112.00 mark

• USD/JPY gains some follow-through traction for the second straight session on Thursday.
• Concerns over economic fallout from the coronavirus weighed heavily on the Japanese yen.
• The prevailing strong bullish sentiment around the USD remained supportive of the move.

The USD/JPY pair maintained its strong bid tone through the mid-European session, albeit has retreated around 20 pips from near 10-month tops set earlier this Thursday.

A combination of factors helped the pair to continue gaining traction for the second consecutive session on Thursday and build on the previous session’s upsurge of around 1.3% – the biggest single-day rise in five months.

USD/JPY boosted by a combination of factors

Given the rise in the number of coronavirus cases in Japan, concerns over deepening economic fallout from the outbreak turned out to be one of the key factors that triggered some aggressive selling around the Japanese yen.

Against the backdrop of a sharp contraction in the economic activity during the last quarter of 2019, investors now see higher possibilities that the world’s third largest economy would certainty tip into a technical recession.

Even a softer tone surrounding equity markets, which tends to underpin demand for traditional safe-haven currencies, did little to hinder the pair’s ongoing bullish momentum to the highest level since April 2019.

Meanwhile, bullish traders further took cues from the prevailing strong bullish sentiment surrounding the US dollar, which, so far, seemed rather unaffected by a fresh leg of downfall in the US Treasury bond yields.

However, extremely overbought conditions on short-term charts seemed to be the only factor holding investors from placing fresh bullish bets and might eventually lead to some near-term consolidative price action.

Moving ahead, market participants now look forward to the US economic docket, featuring the release of the usual weekly jobless claims and Philly Fed Manufacturing Index, in order to grab some short-term trading opportunities.

Technical levels to watch