USD/JPY recovers above 110.70 as 10-year US T-bond yield starts to push higher

• USD/JPY remains on track to close sixth straight day in the positive territory.
• US Dollar Index erased large portion of daily losses in late American session.
• 10-year US T-bond yield is up nearly 2% on the day.

The USD/JPY pair extended its rally to a fresh yearly high of 110.96 on Wednesday but lost its traction in the second half of the day.

DXY recovers on the back of T-bond yields

The broad-based selling pressure surrounding the USD in the early American session caused the pair to retreat below 110.50. However, USD/JPY turned north once again and was last seen gaining 0.37% on the day at 110.75 supported by a sharp rebound witnessed in the US Treasury bond yields. 

The benchmark 10-year US T-bond yield, which spent the majority of the day, is currently rising nearly 2% on the day and the US Dollar Index is posting small daily losses at 93.20.

Meanwhile, the risk-positive market environment is making it difficult for the JPY to find demand and allowing USD/JPY stay in the green. The S&P 500 Index notched a new all-time high at 3,994 on Wednesday and is currently rising 0.8% at 3,990.

Later in the session, US President Joe Biden is expected to unveil his massive $2 trillion infrastructure plan. Earlier in the day, the data published by the Automatic Data Processing (ADP) Research Institute revealed that employment in the US private sector rose by 517,000 in March following February's dismal increase of 176,000 and helped the market mood improve. 

On Thursday, Tankan Large Manufacturing Index and Jibun Bank Manufacturing PMI will be featured in the Japanese economic docket. 

Technical levels to watch for