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  • USD/JPY builds on Friday’s impressive gains on Monday.
  • Activity in US manufacturing sector expanded at a strong pace in July.
  • US Dollar Index retreats modestly after advancing toward 94.00.

The USD/JPY pair erased all of its weekly losses and gained more than 100 pips on Friday. With the greenback preserving its strength at the start of the new week, the pair extended its rebound and touched its highest level at 106.47 on Monday. As of writing, the pair was up 0.4% on a daily basis at 106.28.

USD rebounds on the back of rising T-bond yields

The decisive recovery witnessed in the US Treasury bond yields provided a boost to the USD on Monday. The US Dollar Index (DXY) advanced to a session high of 93.99 in the early trading hours before retreating modestly. At the moment, the 10-year US T-bond yield is up nearly 5% and the DXY is gaining 0.37% at 93.80.

Meanwhile, Wall Street’s main indexes are up between 0.7% and 1.3% on the day, pulling investors’ attention away from T-bonds and the USD.

The data published by the Institute for Supply Management (ISM) showed on Monday that the economic activity in the US’ manufacturing sector expanded at a stronger pace than expected. The ISM Manufacturing PMI rose from 52.6 in June to 54.2 and beat analysts’ estimate of 53.6.

In the Asian session on Tuesday, Tokyo Consumer Price Index (CPI) and Monetary Base data, which are unlikely to have a significant impact on USD/JPY, will be featured in the Japanese economic docket. 

Technical levels to watch for