USD/JPY tests 110 boosted by broad-based USD strength

• US Dollar Index climbs above 98.50 on Thursday.
• 10-year US Treasury bond yield pares early losses, turns positive on the day.
• Wall Street’s main indexes extend rally into fourth straight day.

After failing to break above the 110 mark earlier in the day, the USD/JPY pair returned to 109.80 area and, once again, turned north during the American trading hours. As of writing, the pair was trading at 109.99, adding 0.16% on a daily basis.

The upbeat market mood and the broad USD strength seem to be driving the pair higher on Thursday. 

The 10-year US Treasury bond yield erased more than 1% during the European session but retraced its fall in the last hours and turned positive on the day to suggest that investors don’t yet think that the relief rally is over.

Additionally, Wall Street’s three major indexes started the day higher and the Dow Jones Industrial Average hit a fresh all-time high before retreating slightly. At the moment, these indexes are up between 0.15% and 0.4% on the day.

DXY edges higher on Thursday

In the meantime, the USD continues to gather strength against its major rivals with the US Dollar Index (DXY) rising above the 98.50 mark for the first time in more than two months. The data from the US on Thursday revealed that Unit Labor Costs in the fourth quarter increased 1.4% and the Nonfarm Labor Productivity rebounded to +1.4% from -0.2% in the third quarter.

The Japanese economic docket will feature the Coincident Index and the Leading Economic Index on Friday. Later in the day, the Nonfarm Payrolls (NFP) from the US will be watched closely by the market participants. Experts expect the NFP to print 160K in January following December’s 145K reading.

Technical levels to watch for