USD/JPY gains traction on rising US T-bond yields, approaches 110.50

  • 10-year US T-bond yield stages a decisive recovery.
  • US Dollar Index stays near 96.50.
  • Coming up: Building permits, housing starts, and consumer confidence data from the U.S.

After staying relatively calm and closing the day a few pips above the 110 mark on Monday, the USD/JPY turned north today and started to erase last week's losses. As of writing, the pair was up 0.4% on a daily basis at 110.40.

The sharp drop that started in the second half of the previous week in the US Treasury bond yields continued on Monday to help the safe-haven JPY stay resilient against its peers. However, with the 10-year reference rising more than 1% on Tuesday, the positively-correlated pair gained traction. Moreover, modest gains seen in the major European equity indexes supported the pair's action. Meanwhile, the S&P 500 futures is adding 0.5% on the day, reflecting the improved market sentiment and suggesting that all Street is likely to start the day in the positive territory.

On the other hand, ahead of the housing market and consumer confidence data from the U.S., the US Dollar Index stays stuck in its consolidation channel near 96.50, letting the market's risk perception remain as the primary catalyst.

Earlier today, the BoJ in its Summary of Opinions report reiterated that the bank will take policy action pre-emptively if economic & price developments were to change.

Key technical levels

The pair could face the initial resistance at 110.65 (50-DMA) ahead of 111.10 (20-DMA) and 111.50 (200-DMA). On the downside, supports are located at 110 (psychological level/daily low), 109.70 (Mar. 25 low) and 109.40 (Jan. 27 low).

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