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  • USD/JPY lost its bullish momentum after advancing beyond 104.00.
  • 10-year US Treasury bond yield is consolidating weekly rally.
  • Eyes on December Nonfarm Payrolls report from US.

The USD/JPY pair climbed to its highest level since mid-December at 104.09 on Friday but erased its gains with markets turning quiet ahead of key US data. As of writing, USD/JPY was virtually unchanged on the day at 103.82.

US T-bond yields to continue to impact USD/JPY action

In the second half of the week, the surging US Treasury bond yields provided a boost to the positively-correlated USD/JPY. With the 10-year US T-bond yield rising nearly 13% in the previous two trading days, USD/JPY staged an impressive rebound and rose more than 150 pips. 

Reflecting the broad USD strength, the US Dollar Index (DXY) advanced beyond 90.00 for the first time in a week. At the moment, the DXY is modestly higher on the day at 89.90.

Later in the session, the US Bureau of Labor Statistics will publish the December Nonfarm Payrolls (NFP) report. Investors expect the NFP to decline to 71K from 245K in November. A better-than-expected reading could help T-bond yields push higher and allow USD/JPY to finish the week above 104.00.

On the other hand, a disappointing NFP reading could cause investors to adopt a cautious stance ahead of the weekend and weigh on USD/JPY.

Nonfarm Payrolls Preview: Long path to recover to be even longer.

US Nonfarm Payrolls December Preview: Labor economy woes escalate.

Technical levels to watch for