USD/JPY retreats from multi-week highs, clings to small gains around 109.50

The USD/JPY pair snapped a three-week losing streak and gained more than 100 pips last week. Although the pair managed to advance to its highest level since April 13 at 109.71, it struggled to preserve its bullish momentum and was last seen posting small daily gains at 109.47.

Despite the broad-based selling pressure surrounding the greenback, USD/JPY stays in the positive territory supported by rising US Treasury bond yields. Currently, the benchmark 10-year US T-bond yield, which rose more than 4% last week, is up 0.5% at 1.642%. In the meantime, the US Dollar Index is down 0.22% at 91.10.

Ahead of key macroeconomic data releases from the US, the upbeat market mood seems to be making it difficult for the USD to find demand. Reflecting the risk-on market environment, the S&P 500 Futures are up 0.5%.

Later in the session, the IHS Markit will release the final US Manufacturing PMI for April. Furthermore, the ISH Manufacturing PMI will be watched closely by market participants, especially underlying details with regard to input price pressures and labour shortages. Additionally, FOMC Chairman Jerome Powell will be delivering a speech at 1820 GMT.

USD/JPY near-term outlook

Previewing USD/JPY's short-term price outlook, "while upward momentum has not improved by much, the upward bias is still intact," said UOB Group analysts. "The next resistance is at 109.60 followed by a major level at 109.95. On the downside, a breach of 108.55 (‘strong support’ level previously at 108.20) would indicate that the positive phase has ended."

Additional levels to watch for