- USD / JPY is moving higher for the third day in a row, reaching new multi-month highs.
- Risk appetite sentiment weighs on the safe-haven JPY and supports the pair’s upward move.
- The recent rally in US bond yields benefits the USD and provides additional momentum.
The USD has gained some positive traction during the Asian session on Monday and has pushed the USD / JPY pair to fresh nine-month highs, around the 109.35 region. At time of writing, the pair is pulling back from the highs but remains positive on the day around the 109.10 region.
A combination of supporting factors has helped the pair gain traction on the first day of a new week and build on the momentum of the previous day above the 109.00 level. Underlying bullish sentiment in financial markets has continued to weigh on the safe-haven Japanese yen. This, coupled with a modest pickup in demand for the US dollar, has provided an additional boost to the USD / JPY pair.
Investors are still optimistic about a strong global economic recovery amidst the impressive rate of vaccination for COVID-19. This, along with the approval of a massive stimulus package in the US, it has further boosted investor sentiment and continued to support the optimistic sentiment prevailing in the market. It’s worth remembering that US President Joe Biden signed a $ 1.9 trillion pandemic aid bill on Friday.
Meanwhile, the reflation trade has been fueling concerns about a possible pickup in US inflation and has raised doubts that the Fed will keep interest rates ultra-low for a longer period. This, in turn, has continued to push US bond yields higher, which has been seen as a key factor that has offered some support to the US dollar and provided additional momentum to the current upward movement of the USD / JPY pair. .
In the meantime, the RSI on the daily chart remains in the overbought zone and warrants some caution before opening new bullish positions. Investors may also become cautious and prefer to wait on the sidelines before this week’s FOMC meeting. Apart from this, the BoJ monetary policy update on Friday should help investors determine the next directional move for the USD / JPY pair.
Meanwhile, overall market risk sentiment, US bond yields, and USD price dynamics will influence the USD / JPY pair. Investors could follow the signals from Monday’s release of the Empire State Manufacturing Index, to be released at the start of the US session, to seize some short-term opportunities.
USD / JPY technical levels
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