USD/JPY stages modest rebound, posts small gains above 108.50

• USD/JPY is trading in the positive territory ahead of US data.
• 10-year US Treasury bond yield is down nearly 1% on Thursday.
• US Dollar Index is down for the third straight day.

The USD/JPY pair rose to a daily high of 108.81 in the early European session but turned south with the USD facing strong selling pressure. After dropping below 108.40, the pair staged a modest recovery and was last seen gaining 0.18% on the day at 108.58.

Risk-positive environment limits JPY’s gains

On Wednesday, USD/JPY finished the day in the red as the US Treasury bond yields remained on the back foot after the latest 10-year Treasury note auction. However, the upbeat market mood, as mirrored by the strong gains witnessed in the major European equity indexes and US stocks futures, makes  it difficult for the JPY to find demand and helps USD/JPY find support.

Additionally, the 10-year US T-bond yield, which was down more than 2% earlier in the day, edged higher ahead of the American session and is currently down 1% on the day, supporting USD/JPY’s recent rebound.

On the other hand, the greenback is struggling to attract investors with the US Dollar Index losing 0.28% at 91.57. Later in the session, the weekly Initial Jobless Claims and the JOLTS Job Opening data will be featured in the US economic docket.

Meanwhile, investors will keep a close eye on the performance of Wall Street’s main indexes. If risk flows continue to dominate the financial markets in the second half of the day, USD/JPY is unlikely to make a decisive move in either direction.

Technical levels to watch for