USD/JPY climbs to over two-week tops, closer to mid-110.00s

• Sustained USD buying assisted USD/JPY to regain positive traction on Tuesday.
• Rising best for an earlier Fed taper continued acting as a tailwind for the USD.
• COVID-19 jitters might benefit the safe-haven JPY and cap gains for the major.

The USD/JPY pair held on to its intraday gains and was last seen trading just below mid-110.00s, or over two-week tops heading into the European session.

Having found a decent support near the key 110.00 psychological mark on Monday, the USD/JPY pair caught some fresh bids on Tuesday and prolonged its recent bounce from the lowest level since late May. This marked the fourth day of a positive move in the previous five and was exclusively sponsored by the underlying bullish sentiment around the US dollar.

Friday's stronger-than-expected US monthly jobs report marked another step towards the Fed's goal of substantial further progress in the labor market recovery. This, in turn, forced investors to started pricing in an interest rate hike, as soon as 2022. The market speculations were further fueled by Atlanta Fed President Raphael Bostic's comments on Monday.

Speaking at an online event, Bostic said that the Fed could begin tapering between October and December, or even earlier if there is another month or two of strong job gains. This was reinforced by the recent strong move up in the US Treasury bond yields, which was seen as a key factor that continued acting as a tailwind for the greenback.

That said, worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery weighed on investors sentiment. This was evident from a generally softer tone surrounding the equity markets, which might extend some support to the safe-haven Japanese yen and keep a lid on any strong gains for the USD/JPY pair.

There isn't any major market-moving economic data due for release from the US, leaving the USD/JPY pair at the mercy of the USD price dynamics. Apart from this, the broader market risk sentiment and the US bond yields might further contribute to produce some short-term trading opportunities around the USD/JPY pair.

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