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  • USD/JPY regained positive traction on Monday and reversed the previous session’s losses.
  • The risk-on mood undermined the safe-haven JPY and provided a goodish lift to the pair.
  • Surging US bond yields revived the USD demand and remained supportive of the move up.

The USD/JPY pair held on to its modest intraday gains through the early European session and was last seen trading near the top end of its daily range, around mid-105.00s.

A combination of supporting factors assisted the pair to regain positive traction on the first day of a new trading week and recover its losses recorded in the previous session. As investors looked past Friday’s mixed US monthly jobs report, the US dollar was back in demand amid the ongoing upsurge in the US Treasury bond yields. Apart from this, the upbeat market mood undermined demand for the safe-haven Japanese yen and provided a modest lift to the USD/JPY pair.

The January NFP report strengthened the case for more US fiscal measures to support the economy. Bets for a massive US stimulus package increased further after 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. This, in turn, pushed the yield on the benchmark 10-year US government bond to near one-year tops and revived the greenback demand on Monday.

Meanwhile, progress in coronavirus vaccination further fueled hopes for a strong economic recovery and continued boosting investors’ confidence. This was evident from the underlying bullish sentiment across the global equity markets, which, in turn, drove flows away from traditional safe-haven assets. It will now be interesting to see if the USD/JPY pair is able to capitalize on the move or continues with its struggle to find acceptance above the very important 200-day SMA.

There isn’t any major market-moving economic data due for release from the US on Monday. That said, the US stimulus headlines might continue to influence the US bond yields and the USD price dynamics. Traders might further take cues from the broader market risk sentiment in order to grab some meaningful opportunities.

Technical levels to watch