USD/JPY CLIMBS TO FRESH SESSION TOPS, LACKS FOLLOW-THROUGH BEYOND MID-111.00S

• USD/JPY attracted some dip-buying on Thursday and was supported by a combination of factors.
• The risk-on mood undermined the safe-haven JPY and extended support amid a modest USD uptick.
• Hawkish Fed expectations, rising US bond yields, upbeat US data acted as a tailwind for the buck.

The USD/JPY pair recovered over 30 pips from the daily swing lows and climbed to fresh daily tops, around the 111.55 region during the early North American session.

A combination of factors assisted the USD/JPY pair to attract some dip-buying near the 111.20 region for the second straight session on Thursday. The risk-on impulse in the markets was seen as a key factor that undermined the safe-haven Japanese yen and extended some support to the major. This, along with a modest pickup in the US dollar demand, provided a modest lift.

The global risk sentiment witnessed a turnaround on Wednesday after Russian leaders reassured Europe on gas supplies. Adding to this, the top US Senate Republican Mitch McConnell put forward a compromise of a short-term suspension of the US debt ceiling to avert a national default. This was seen as another factor that boosted investors’ appetite for perceived riskier assets.

On the other hand, the USD continued drawing some support from firming market expectations about an early policy tightening by the Fed. The USD bulls further took cues from a fresh leg up in the US Treasury bond yields. On the economic data front, the US Initial Weekly Jobless Claims fell more than expected last week and further acted as a tailwind for the greenback.

The uptick, however, lacked any strong follow-through, at least for the time being, as investors now seemed reluctant to place aggressive bets ahead of Friday’s release of the US monthly jobs report. Nevertheless, the fundamental backdrop favours bullish traders and supports prospects for a move back towards the overnight highs, around the 111.75-80 region, en-route the 112.00 mark.