- USD/JPY gained follow-through traction for the second consecutive session on Friday.
- Hawkish Fed expectations pushed the US bond yields higher and remained supportive.
- A softer risk tone, a modest USD weakness did little to hinder the positive momentum.
The USD/JPY pair climbed to three-day tops heading into the North American session, with bulls looking to extend the momentum further beyond the key 110.00 psychological mark.
The pair gained strong follow-through traction for the second successive session on Friday and built on this week's goodish rebound from the 109.10 region, or one-month lows. Bulls seemed rather unaffected by a modest US dollar pullback, instead took cues from rising US Treasury bond yields.
Thursday's upbeat US Retail Sales data underscored consumer confidence and pointed to the continuation of economic recovery. This, in turn, reinforced market expectations that the Fed would eventually begin rolling back its crisis-era stimulus sooner than later and pushed the US bond yields higher.
On the other hand, the Japanese yen was weighed down by the fact that the Japanese government cut its economic view 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 move up.
The combination of supporting factors helped offset a softer risk tone, which tends to benefit the safe-haven JPY. Worries about the fast-spreading Delta variant, along with a global economic slowdown weighed on investors' sentiment and dented demand for perceived riskier assets.
The intraday momentum seems strong enough to push the USD/JPY pair further towards the next relevant hurdle near the 110.25-30 region. Some follow-through buying beyond monthly swing highs, around the 110.45 region, will set the stage for a further near-term appreciating move.
Market participants now look forward to the release of the Prelim Michigan US Consumer Sentiment Index, which might influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some opportunities around the USD/JPY pair.
Technical levels to watch
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