- USD/JPY edged higher for the second consecutive session on Tuesday amid stronger USD.
- An uptick in the US bond yields acted as a tailwind for the USD and remained supportive.
- The risk-on mood underpinned the safe-haven JPY and might cap the upside for the pair.
The USD/JPY pair traded with a mild positive bias during the early European session, with bulls making a fresh attempt to conquer and build on the momentum beyond the 109.00 mark.
The US dollar built on the overnight modest bounce from the lowest level since February 25 amid a modest uptick in the US Treasury bond yields. This, in turn, was seen as a key factor that assisted the USD/JPY pair to edge higher for the second consecutive session on Tuesday.
Apart from this, worries that the recent surge in COVID-19 cases could hinder Japan’s fragile economic recovery further acted as a headwind for the Japanese yen. That said, a generally softer risk tone underpinned the safe-haven JPY and might cap the upside for the USD/JPY pair.
Meanwhile, the downside is likely to remain cushioned amid expectations that rising inflation might force the Fed to tighten its monetary policy sooner rather than later. Hence, the key focus will remain on the latest US consumer inflation figures, due for release on Wednesday.
In the meantime, the US bond yields will play a key role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon for some trading opportunities around the USD/JPY pair amid absent relevant market moving economic releases.
Technical levels to watch