USD/JPY recovers modestly, trades above 109.80 on improving mood

• USD/JPY is edging slightly higher in the American session.
• Wall Street's main indexes are trading in the positive territory.
• 10-year US Treasury bond yield is posting modest daily gains.

The USD/JPY pair dropped toward 109.50 area earlier in the day but reversed its direction in the second half of the day. As of writing, the pair was up 0.1% on the day at 109.83.

The improving market sentiment seems to be making it difficult for the JPY to find demand ahead of the weekend. Reflecting the upbeat mood, the S&P 500 and the Nasdaq Composite indexes are rising 0.35% and 0.9% respectively. Moreover, the 10-year US Treasury bond yield, which was down nearly 1% during the European session, is now up 0.4% on a daily basis and helping USD/JPY stay in the positive territory.

Nevertheless, the USD is also struggling to gather strength and limiting USD/JPY's upside. Currently, the US Dollar Index is flat on the day at 93.57.

USD/JPY outlook

Commenting on USD/JPY's recent action, "momentum indicators are turning ‘flat’ and for today, USD is likely to trade sideways, expected to be within a 109.55/110.05 range," said UOB Group analysts. 

USD/JPY now moved into a consolidative phase – UOB.

Technical levels to watch for