USD/JPY recovers from multi-week lows amid rebounding bond yields, stronger USD

• USD/JPY gained some positive traction on Friday and snapped four days of the losing streak.
• Thursday’s upbeat US macro data, rebounding US bond yields extended support to the USD.
• The lack of strong follow-through buying warrants caution before placing fresh bullish bets.

The USD/JPY pair traded with a mild positive bias through the early European session and was last seen hovering near daily tops, just below the 109.00 mark.

The pair reversed an early dip to over three-week lows, around the 108.60 region and for now, seems to have snapped four consecutive days of the losing streak. The uptick was supported by a combination of factors, though lacked any strong follow-through buying.

The US dollar staged a modest bounce from multi-week lows after Thursday’s upbeat US macro data indicated that the recovery is well on track. Some follow-through USD uptick was seen as a key factor that assisted the USD/JPY pair to gain traction on Friday.

The greenback further benefitted from a solid rebound in the US Treasury bond yields. That said, expectations that the Fed will keep interest rates low for a longer period held the USD bulls from placing aggressive bets and capped gains for the USD/JPY pair.

This makes it prudent to wait for some strong follow-through buying before confirming that the recent corrective pullback from the 111.00 neighbourhood or one-year tops is over. This will set the stage for a further appreciating move for the USD/JPY pair.

Market participants now look forward to the release of Housing Starts, Building Permits and prelim Michigan Consumer Sentiment Index from the US. This, along with the US bond yields, will influence the USD and produce trading opportunities around the USD/JPY pair.

Technical levels to watch