USD/JPY spikes to three-day tops, climbs further beyond 105.00 mark
- A strong pickup in the USD demand assisted USD/JPY to recover further from two-week lows.
- A pullback in the equity markets did little to benefit the safe-haven JPY or stall the momentum.
The USD/JPY pair added to its intraday gains and shot to three-day tops, further beyond the key 105.00 psychological mark during the first half of the European session.
The pair built on the previous day's positive move and gained some follow-through traction on the last trading day of the week. The momentum allowed the USD/JPY pair to recover further from near two-week lows, around the 104.40 region touched on Wednesday.
Despite doubts about the strength of the US economic recovery, the USD was back in demand and was seen as one of the key factors driving the USD/JPY pair higher. Meanwhile, a mixed performance in the US bond market did little to influence the USD price dynamics.
With the USD price dynamics turning out to be an exclusive driver of the USD/JPY pair's momentum, bulls largely shrugged off a modest pullback in equity markets. The risk-off mood tends to benefit traditional safe-haven currencies, including the Japanese yen.
The negative factor, to a large extent, was offset by the optimism over the progress in the rollout of vaccines for the highly contagious coronavirus disease. Adding to this, expectations for a massive US fiscal spending plan should continue to underpin the risk sentiment.
The USD/JPY pair has now recovered a major part of its weekly losses and some follow-through buying beyond the 105.25 level will set the stage for additional gains. The momentum might then push the pair back towards the 105.65-75 supply zone.
Friday's US economic docket highlights the only release of the Michigan Consumer Sentiment Index. The data, along with the US bond yields, might influence the USD and produce some short-term trading opportunities around the USD/JPY pair.
Technical levels to watch