- USD / JPY is moving lower during the European session amid some profit taking around the USD.
- A modest pullback in US bond yields is seen as a key factor weighing on the USD.
- The optimistic US economic outlook and risk appetite sentiment should help limit any sharp decline.
The pair USD/JPY has seen some selling during the European session on Tuesday and has fallen to new daily lows, around the region of 108.60 in the last hour.
The pair had prolonged its recent strong bullish move and continued to climb higher during the first half of trading action on Tuesday. The momentum pushed the USD / JPY pair above 109.00, the highest level since June 2020, although it lost steam amid some profit-taking around the US dollar..
U.S. Treasury Secretary Janet Yellen said Monday that the massive US stimulus package would provide enough resources to drive a very strong US economic recovery. Yellen further added that there are tools to deal with inflation, which led to a modest pullback in US bond yields and weighed on the dollar.
Meanwhile, the passage of the highly anticipated $ 1.9 trillion fiscal spending bill has continued to support a relatively faster US economic recovery from the pandemic. This, in turn, should continue to prop up the dollar and help limit the decline in the USD / JPY pair, At least for the moment.
Apart of this, underlying bullish sentiment in financial markets could limit the rise of the safe-haven Japanese yen and offer some support to the USD / JPY pair. This, in turn, warrants some caution for bears before positioning for any significant corrective declines.
There is no major economic data release other than from the United States on Tuesday. Therefore, US bond yields will play a key role in influencing USD price dynamics. Investors could follow the signs of the broader market risk sentiment to seize some opportunities around the USD / JPY pair.
USD / JPY technical levels
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