- A combination of factors helps USD / JPY gain traction for the seventh day in a row.
- The rally in US bond yields benefits the USD and fuels the current bullish momentum.
- The underlying risk appetite weighs on the safe-haven JPY and offers support to the pair.
The pair USD/JPY continues to move higher during Thursday’s European session and has soared to nearly three-month highs, around the 105.25 region.
The pair has prolonged its bullish movement for the seventh day in a row on Thursday and has capitalized on the momentum above the key psychological level of 105.00. The US bond market has reacted strongly amid firm expectations of massive fiscal stimulus measures in the US. This, in turn, has continued to prop up the US dollar and has been seen as a key factor driving the USD / JPY pair higher.
It’s worth reporting that Democrats took the first step in promoting President Joe Biden’s proposed COVID relief package without Republican support. The Senate began debating a budget resolution for 2021 with spending instructions for the coronavirus. While it’s unclear how much commitment Republicans are willing to make, investors still expect additional spending of at least $ 1 trillion.
The USD was supported by optimistic US economic data for Wednesday, which showed that private sector employment grew by 174,000 new jobs in January compared to 49,000 expected. On the other hand, the employment subcomponent of the US ISM service sector PMI report showed a significant increase from the previous month and raised expectations for NFP non-farm payrolls, to be released on Friday.
Apart of this, underlying bullish sentiment in financial markets has weighed on the safe-haven Japanese yen and it has provided an additional boost to the USD / JPY pair. With that said, the RSI on the daily chart has now approached overbought territory and warrants some caution for the bulls. This makes it prudent to wait for some short-term consolidation before any other continuation bullish movement.
Market participants are now awaiting the release of the US weekly initial jobless claims data to gain some momentum at the start of the American session. This, along with the news about the US stimulus, will play a key role in influencing the dynamics of USD prices. Investors could follow the signs of the broader market risk sentiment to seize some significant short-term opportunities.
USD / JPY technical levels
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