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  • 10-year United States Treasury bond yield gains more than 3% on Tuesday.
  • Japan hiked the sales tax despite concerns over a negative impact on the economy.
  • Coming up: Manufacturing Purchasing Managers’ Index (PMI) data from the United States.

The broad-based USD strength and the upbeat market sentiment on Tuesday allowed the USD/JPY pair to extend its rally into a fifth straight trading day. After touching a fresh two-week high of 108.46, however, the pair lost its traction and was last seen trading at 108.28, still adding 0.2% on a daily basis.

Upbeat mood weighs on the JPY

Hopes of the United States (US) and China making forward progress in trade negotiations later this month caused the risk-on flows to continue to dominate the market action and weighed on the safe-haven JPY.

Major equity indexes in Asia closed the day in the positive territory and the 10-year US Treasury bond yield gained traction to reflect the upbeat mood. As of writing, the 10-year T-bond yield was up 3.75% on the day at 1.734%. Moreover, the S&P 500 Futures is rising 0.25% to suggest that Wall Street is likely to start the day in the positive territory and build on Monday’s gains.

On the other hand, the Greenback took advantage of the rising T-bond yield and the selling pressure surrounding the EUR to preserve its strength. Ahead of the  IHS Markit’s and the Institue of Supply Management’s  Purchasing Managers’ Index (PMI) reports, the US Dollar Index is up 0.1% on the day at 99.50.

Additionally, Federal Reserve Vice-Chair Clarida and Federal Open Market Committee (FOMC) members Bullard and Bowman will be delivering speeches later in the session.

Technical levels to watch for