USD/JPY clings to gains near one-month tops, comfortable above 104.00 mark
- USD/JPY continued gaining traction for the fourth consecutive session on Monday.
- A strong rally in the US bond yields underpinned the USD and remained supportive.
- COVID-19 jitters weighed on investors’ sentiment and capped the upside for the pair.
The USD/JPY pair maintained its bid tone through the early European session and was last seen trading near one-month tops, around the 104.15 region.
The pair built on last week's goodish rebound from the 102.60 region, or multi-month lows, and edged higher for the fourth consecutive session on Monday. The recent strong rally in the US Treasury bond yields – amid hopes for additional US financial aid package – helped revive the US dollar demand, which, in turn, was seen as a key factor driving the USD/JPY pair higher.
The Democratic sweep in the crucial US Senate runoff elections in the state of Georgia raised prospects for a more aggressive US fiscal spending in 2021, including increased direct payments and considerable infrastructure spending. Friday's disappointing headline NFP print further fanned the speculations and pushed the US Treasury bond yields to the highest level since March.
Meanwhile, concerns about the continuous surge in coronavirus cases and the imposition of strict lockdown restrictions in Europen/China tempered enthusiasm. This was evident from a softer tone in the equity markets, which extended some support to the safe-haven Japanese yen. This might hold bulls from placing aggressive bets and warrants some caution before positioning for any further gains.
There isn't any major market-moving economic data due for release from the US. Hence, the US bond yields will continue to play a dominant role in influencing the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon for some short-term trading opportunities around the USD/JPY pair.
Technical levels to watch