USD/JPY is near 136.50, above 1-week highs; no tracking

• USD/JPY soared to a one-week high in reaction to the bullish June NFP report.
• The widening rate spread between the US and Japan weighed on the yen and remained supportive.
• The fundamental backdrop supports the prospects for a move towards 137.00.

The pair USD/JPY regained ground lost earlier, down to the 135.30 zone, and turned positive for the fifth day in a row on Friday. The intraday rally accelerated during the early American session and took the pair to a one-week high around the 136.55 area.

The US dollar held near its two-decade highs after the monthly US employment report indicated that the US economy added 372,000 jobs in June, far more than the forecast 268,000. The NFP optimism was accompanied by a stable unemployment rate, which stood at 3.6% for the reported month. Additionally, Atlanta Fed President Raphael Bostic backed the idea of ​​a 75 basis point rate hike at the next FOMC meeting in July.

Speaking to CNBC, Bostic, one of the more dovish policymakers, said that the Federal Reserve must act aggressively and that the core of the US economy remains strong. This, in turn, boosted US Treasury yields and further widened the US-Japan rate spread. Apart from this, the divergent policy stance taken by the Fed and the Bank of Japan undermined the Japanese Yen, which, in turn, pushed the USD/JPY pair higher.

However, dollar bulls seemed reluctant to place further bets amid modestly oversized conditions, especially after the recent strong bull run. This was the only factor that prevented the USD/JPY pair from rising significantly, at least for the time being. That said, the fundamental backdrop supports the prospects of retesting a 24-year high around the 137.00 level touched in June.

Technical levels