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  • USD/JPY attracted some dip-buying on Wednesday and recovered a part of the overnight losses.
  • The emergence of fresh buying around the USD contributed to the pair’s intraday rally of 50 pips.
  • The bullish sentiment undermined the safe-haven JPY and remained supportive ahead of US CPI.

The USD/JPY pair refreshed daily tops during the mid-European session, with bulls now looking to build on the momentum further beyond the 104.00 mark.

The pair quickly reversed an intraday dip to near one-week lows, around mid-103.00s and has now recovered a part of the previous day’s losses. The intraday uptick got an additional boost amid the emergence of some fresh buying around the US dollar.

The yield on the benchmark 10-year US government bond stalled its retracement slide from a 10-month high hit on Tuesday and helped revive the USD demand. This, in turn, was seen as a key factor behind the USD/JPY pair’s intraday gains of around 50 pips.

Investors started pricing in the prospects for a more aggressive US fiscal spending in 2021 following the Democratic sweep in the US Senate runoff elections in Georgia. Expectations of a larger government borrowing sparked a bond-market selloff and boosted the USD.

Apart from this, hopes for a strong global economic recovery remained supportive of the underlying bullish sentiment in the financial markets. The risk-on mood undermined the safe-haven Japanese yen and extended some additional support to the USD/JPY pair.

Market participants now look forward to the US economic docket – highlighting the release of the latest consumer inflation figures. This, along with the US bond yields, will influence the USD price dynamics and produce some opportunities around the USD/JPY pair.

Technical levels to watch