USD/JPY consolidates near two-month tops, holds comfortably above 110.00 mark

The USD/JPY pair lacked any firm directional bias and seesawed between tepid gains/minor losses heading into the European session. The pair was last seen hovering around the 110.25-20 region, just below the two-month tops set earlier this Friday.

Following the previous day's strong positive move, the pair now seems to have entered a bullish consolidation phase amid some nervousness ahead of the closely-watched US monthly jobs data. The NFP report will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month. This, in turn, kept a lid on the recent optimism, which extended some support to the safe-haven Japanese yen and capped the upside for the USD/JPY pair.

That said, concerns that an extension of the state of emergency in Tokyo and eight other prefectures could hinder Japan's fragile economic recovery acted as a headwind for the JPY. This, along with a modest US dollar strength, helped limit the downside for the USD/JPY pair. The USD remained well supported by Thursday's upbeat US macro data, which indicated that the US recovery is gathering pace and fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases.

The fundamental backdrop supports prospects for additional gains. The constructive outlook is reinforced by the fact that the USD/JPY pair has found acceptance above the key 110.00 psychological mark. However, bulls might still wait for some strong follow-through buying before positioning for any further appreciating move, possibly towards YTD tops, around the 110.95 region touched in March.

Technical levels to watch