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  • The strong buying interest around USD/JPY remained unabated on the last trading day of the week.
  • A broad-based USD strength was seen as a key factor that pushed the pair to fresh nine-month tops.
  • Investors now look forward to the closely watched US monthly jobs report for a fresh bullish impetus.

The USD/JPY pair continued scaling higher through the first half of the European session and shot to near nine-month tops, around mid-108.00s in the last hour.

The US dollar remained well supported by the optimistic US economic outlook and got an additional boost from the overnight surge in the US Treasury bond yields. The Fed Chair Jerome Powell on Thursday largely dismissed concerns about the recent sharp rise in long-term yields and disappointed investors anticipating immediate action. This, in turn, trigger a massive sell-off in the US fixed income market and lifted the US bond yields.

On the other hand, the safe-haven Japanese yen was weighed down by expectations for a strong global economic recovery and failed to gain any respite from the prevalent risk-off mood. The rout in the bond markets fueled fears about distressed selling in other asset classes and took its toll on the global risk sentiment. This was evident from a sea of red in the equity markets, albeit did little to hinder the USD/JPY pair’s strong move up.

Given the overnight sustained break through the 107.00 confluence resistance, a subsequent strength beyond the 108.00 mark further seemed to have prompted some additional short-covering trade. The USD/JPY pair is yet to show any signs of bullish exhaustion, though overbought conditions might prompt traders to take some profits off the table ahead of Friday’s release of the closely watched US monthly jobs data – popularly known as NFP.

The report is scheduled for release later during the early North American session and is expected to show that the US economy added 182K new jobs in February. This would mark a notable gain from the 49K reported in the previous month and reinforce the narrative of strong sequential recovery, boosting the USD and paving the way for additional gains.

Technical levels to watch