USD/JPY refreshes session tops near 103.70 region, lacks follow-through

• A combination of supporting factors assisted USD/JPY to gain some positive traction on Monday.
• The prevalent risk-on mood undermined the safe-haven JPY and helped limit the early downtick.
• A pickup in the US bond yields revived the USD demand and remained supportive of the move up.

The USD/JPY pair rallied around 40 pips from the early European session lows and jumped to fresh session tops, near the 103.70 region in the last hour.

The pair to attract some buying near the 103.40 region and the early uptick was supported by the prevalent risk-on environment, which tends to undermine the safe-haven Japanese yen. The global risk sentiment remained supported by the optimism over a last-minute Brexit deal and relief over a long-awaited US economic stimulus.

The US President Donald Trump signed a $2.3 trillion pandemic aid and spending package on Sunday. The bill restores unemployment benefits to millions of Americans and averted a partial federal government shutdown that would have begun on Tuesday. The positive developments boosted investors’ confidence and weighed on traditional safe-haven assets.

The upbeat market mood was reinforced by a pickup in the US Treasury bond yields, which allowed the US dollar to stage a goodish rebound from the vicinity of over two-and-half-year lows. This was seen as another factor that provided an additional lift to the USD/JPY pair and contributed to the intraday positive move amid thin trading volumes.

From a technical perspective, the USD/JPY pair remains well within a three-day-old trading range amid worries about the discovery of a new faster-spreading variant of the coronavirus. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant economic releases.

Meanwhile, developments surrounding the coronavirus saga will continue to play a key role in driving the broader market risk sentiment. This, along with the USD price dynamics, should assist traders to grab some short-term opportunities.

Technical levels to watch