- Sustained USD buying continues to support buying tone around USD / JPY on Monday.
- Rising US bond yields and optimistic US economic prospects continue to support the USD.
- A softer risk tone offers some support to the safe-haven JPY and limits the pair’s gains.
The pair USD/JPY maintains its modest gains at the start of the European session on Monday, staying close to the upper end of its daily range just below the 108.50 region.
A combination of factors has helped the pair regain positive traction on the first day of a new week already stay close to the highest level since June 2020 played on Friday. The optimist US NFP monthly employment report February has reinforced the outlook for a strong economic recovery and has continued to prop up the US dollar.
The bulls have followed the signs of a New Momentum in US Treasury Yields, spurred by the passage of a huge US tax spending bill on Saturday. The US Senate voted 50-49 in favor of a highly anticipated $ 1.9 trillion pandemic aid package proposed by US President Joe Biden and has triggered another sell-off in the US bond market.
In fact, the yield on the 10-year US government bond is up close to 1.60%, at a one-year high, further benefiting the US dollar. That said, a softer tone in the stock markets has offered some support to the safe-haven Japanese yen and has turned out to be the only factor limiting any wild movements for the USD / JPY.
Investors became cautious following news of attacks on Saudi Arabia’s oil production facilities during the weekend. Apart from this, the overbought RSI on the daily chart has prevented the bulls from opening aggressive positions and could limit the gains of the USD / JPY pair, at least for the time being.
In the absence of major US economic releases, bond yields will continue to play a key role in influencing USD price dynamics. This, coupled with broader market risk sentiment, could give USD / JPY some momentum and allow investors to seize some short-term opportunities.
USD / JPY technical levels
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