USD/JPY looks to build on momentum beyond 110.00 mark amid renewed USD buying

The USD/JPY pair shot to fresh daily tops heading into the North American session, with bulls now looking to build on the momentum beyond the 110.00 psychological mark.

A sudden pickup in the US dollar demand assisted the USD/JPY pair to attract some dip-buying near the 109.70 region, or weekly lows touched earlier this Thursday. Despite Fed Chair Jerome Powell's dovish testimony, investors seem convinced that the US central bank will tighten its policy sooner than anticipated. This, in turn, was seen as a key factor that acted as a tailwind for the greenback.

That said, a combination of factors might keep a lid on any runaway rally for the USD/JPY pair. The ongoing decline in the US Treasury bond yields might hold the USD bulls from placing aggressive bets. Moreover, worries about the spread of the highly contagious Delta variant of the coronavirus should underpin the safe-haven Japanese yen and further collaborate to cap gains for the USD/JPY pair.

Market participants now look forward to the US economic docket, featuring the releases of the usual Initial Weekly Jobless Claims and Philly Fed Manufacturing Index. This, along with the US bond yields and Powell's second day of testimony, will influence the USD. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/JPY pair.

During his semi-annual congressional testimony, Powell reiterated that the recent rise in inflationary pressures was only temporary and would still likely moderate shortly. Powell is unlikely to deviate from his views, which should act as a headwind for the greenback. This, in turn, warrants some caution for bullish traders and before positioning for any meaningful appreciating move in the near term.

Technical levels to watch