USD/JPY sits near YTD tops, above mid-111.00s ahead of Powell/US data

The USD/JPY pair continued scaling higher through the early North American session and tested YTD tops, around the 111.65 region in the last hour.

The pair prolonged its recent bullish trajectory and gained strong follow-through traction for the fifth successive session on Tuesday. The widening of the nominal yield differential between the US and Japanese government bonds continued driving flows away from the Japanese yen.

The US Treasury bond yields have been rallying since the end of last week after the Fed hinted that it would begin tapering its bond purchases as soon as November. Adding to this, the dot plot indicated that policymakers were inclined to raise interest rates in 2022.

Conversely, the 10-year Japanese government bond yields remained near zero due to the Bank of Japan's yield curve control policy. This, along with a broad-based US dollar strength, provided an additional boost to the USD/JPY pair and contributed to the positive momentum.

Bulls seemed rather unaffected by the risk-off impulse, which tends to benefit the safe-haven JPY. The global risk sentiment took a hit amid a selloff in the money markets, worries about the debt crisis at China Evergrandeand Group the intensifying energy crisis in Europe and China.

Next on tap will be Fed Chair Jerome Powell's testimony before the Senate Banking Committee and the release of the Conference Board's Consumer Confidence Index. Apart from this, the US bond yields and the broader market risk sentiment would provide some impetus to the USD/JPY pair.

Technical levels to watch