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  • USD/JPY attracted some dip-buying on Friday and turned positive for the eighth straight session.
  • The upbeat market mood, rallying US bond yields remained supportive of the strong momentum.
  • Bulls largely shrugged off a modest USD pullback and look forward to NFP for a fresh impetus.

The USD/JPY pair rallied around 40 pips from daily swing lows and jumped to fresh three-month tops, around the 105.70 region in the last hour.

The pair quickly reversed an intraday dip to the 105.30 region and turned positive for the eighth consecutive session, with bulls looking to build on the momentum beyond 200-day SMA. The underlying bullish sentiment in the financial markets undermined demand for the safe-haven Japanese yen. This, in turn, was seen as one of the key factor driving the USD/JPY pair.

Meanwhile, bulls largely shrugged off a modest US dollar pullback from over two-month tops, instead took cues from a sudden pickup in the US Treasury bond yields. The US bond market continued reacting strongly to the increasing prospects for a massive US fiscal spending and pushed the yield on the benchmark 10-year government bond to near one-year tops on Friday.

Apart from this, growing confidence that the US economic recovery will outpace its global peers, amid progress in coronavirus vaccinations, should help limit any meaningful USD decline. Hence, the key focus will remain on the release of the US monthly jobs report (NFP). A strong reading will pave the way for a further near-term appreciating move for the USD/JPY pair.

Even from a technical perspective, the emergence of some dip-buying on Friday favours bullish traders and points to further gains. That said, overbought conditions on short-term charts make it prudent to wait for some near-term consolidation or a modest pullback before the next leg up, warranting caution for aggressive bullish traders.

Technical levels to watch