USD/JPY extends rally to fresh 10-day highs near 109.50

• 10-year US Treasury bond yield stages decisive recovery on Tuesday.
• Nasdaq Composite adds more than 2% boosted by risk-on flows.
• US Dollar Index closes in on 98 handle.

The USD/JPY pair extends its daily rally during the American session as risk-on flows continue to dominate the markets. As of writing, the pair was trading at its highest level since January 24th at 109.42, adding 0.7% on a daily basis.

Easing concerns over the negative impact of the coronavirus outbreak on the Chinese and the global economy provided a boost to the risk appetite on Tuesday. The 10-year US Treasury bond yield, which generally showed a strong positive correlation with the USD/JPY pair, is up nearly 5%. Furthermore, Wall Street’s main indexes are posting decisive gains with the Nasdaq Composite leading the way with a daily gain of 2.1%.

USD outperforms its major rivals

On the other hand, the greenback is preserving its strength to help the pair push higher. 

Today’s data from the US showed that the ISM-NY Business Conditions Index in January rose to 45.8 in January from 39.1 in December and the IBD/TIPP Economic Optimism for February rose to 59.8 from 57.4. The US Dollar Index was last seen trading at 0.16% on the day at 97.96.

There won’t be any significant macroeconomic data releases from Japan during the Asian session and the risk sentiment is likely to continue to drive the pair.

Technical levels to watch for