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  • USD/JPY gained traction for the second consecutive session on Wednesday.
  • The upbeat US economic outlook continued lending support to the greenback.
  • A positive risk tone undermined the safe-haven JPY and remained supportive.

The USD/JPY pair refreshed weekly tops heading into the European session, with bulls now awaiting a sustained move beyond the 109.00 round-figure mark.

A combination of supporting factors assisted the pair to build on the previous day’s modest gains and edge higher for the second consecutive session on Thursday. Despite fresh coronavirus jitters, a positive tone around the equity markets undermined the safe-haven Japanese yen. This, in turn, was seen as a key factor lending some support to the USD/JPY pair.

On the other hand, the US dollar continued benefitting from the prospects for a relatively faster US economic recovery from the pandemic, bolstered by the passage of a massive stimulus package. The optimistic US economic outlook was reaffirmed by Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen during their joint testimony before the Congress.

The USD bulls seemed rather unaffected by Wednesday’s disappointing US Durable Goods Orders, instead took cues from PMI prints that indicated business activity picked up in March. Apart from this, a modest uptick in the US Treasury bond yields further underpinned the greenback and contributed to the USD/JPY pair’s uptick through the first half of the trading action.

Looking at the technical picture, the 109.00 level represents the top boundary of a near two-week-old descending trend-channel. Given the recent strong move up, the mentioned channel constitutes the formation of a bullish flag. Hence, a sustained move beyond will make a fresh bullish breakout and set the stage for a further near-term appreciating move for the USD/JPY pair.

Market participants now look forward to the release of the final US GDP print for the fourth quarter of 2020 for a fresh impetus. This, along with a bombardment of Fed speak and the US bond yields, will influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to produce some trading opportunities around the USD/JPY pair.

Technical levels to watch