- USD / JPY gained tracking traction for the second consecutive session on Friday.
- Expectations of an aggressive Fed pushed US bond yields higher and remained favorable.
- Softer risk tone, modest USD weakness, did little to hamper positive momentum.
The pair USD/JPY it rose to three-day highs heading into the American session, with the bulls looking to extend momentum beyond the 110.00 psychological level.
The pair gained strong follow-up traction for the second session in a row on Friday and built on this week’s solid rebound from the 109.10 area, or month-long lows. The bulls did not appear to be affected by a modest pullback in the US dollar, instead following the signs of rising US Treasury yields.
Upbeat US retail sales data on Thursday underscored consumer confidence and signaled continued economic recovery. This, in turn, bolstered market expectations that the Fed would eventually begin rolling back its crisis-era stimulus sooner rather than later and boosted US bond yields.
On the other hand, the Japanese yen was weighed down by the fact that the Japanese government cut its economic outlook for the first time in four months on Thursday. This was seen as another factor that acted as a tailwind for the USD / JPY pair and contributed to the ongoing upward movement.
The combination of support factors helped offset a softer risk tone, which tends to benefit the JPY safe haven. Concerns about the rapidly expanding Delta variant, coupled with a global economic slowdown, weighed on investor sentiment and hurt demand for perceived riskier assets.
Intraday momentum looks strong enough to push USD / JPY further towards the next relevant hurdle near the 110.25-30 zone. Some subsequent purchases beyond the oscillating monthly highs, around the 110.45 region, will set the stage for a further short-term appreciation move.
Market participants are now looking forward to the release of the US Michigan Preliminary Consumer Sentiment Index, which could influence USD price dynamics. Traders could follow the signals of the broader market risk sentiment to seize some opportunities around the USD / JPY pair.
Technical levels
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