USD/JPY sits near multi-month tops, bulls await a move beyond 107.00 mark

The USD/JPY pair maintained its bid tone through the first half of the European session and was last seen hovering near six-month tops, just below the 107.00 mark.

The pair prolonged its recent strong bullish trajectory and continued scaling higher for the sixth consecutive session on Tuesday. The momentum was exclusively sponsored by a broad-based US dollar strength, bolstered by the upbeat US economic outlook.

Investors remain optimistic about a relatively stronger US economic recovery from the pandemic amid the impressive pace of COVID-19 vaccinations. This, along with the progress on a massive US fiscal spending plan, has been fueling the reflation trade.

Apart from this, expectations for a possible uptick in inflation raised doubts that the Fed would retain ultra-low rates for a longer period. This further underpinned the greenback and remained supportive of the USD/JPY pair's ongoing positive move.

That said, a softer risk tone – as depicted by a weaker trading sentiment around the equity markets – extended some support to the safe-haven Japanese yen. This, in turn, capped any further gains for the USD/JPY pair amid slightly overbought RSI on the daily chart.

There isn't any major market-moving economic data due for release from the US on Tuesday, leaving the USD/JPY pair at the mercy of the USD price dynamics. Traders might further take cues from the broader market risk sentiment for some short-term opportunities.

Technical levels to watch