USD/JPY clings to gains near session tops, eyeing 110.00 mark

• USD/JPY regained positive traction on Friday and stalled this week’s retracement slide.
• The risk-on impulse undermined the safe-haven JPY and extended support to the pair.
• A modest uptick in the US bond yields, hawkish Fed expectations remained supportive.

The USD/JPY pair edged higher through the Asian session and was last seen trading near daily tops, with bulls now eyeing to reclaim the key 110.00 psychological mark.

The pair managed to defend the 109.60-55 horizontal support and attracted some fresh buying on the last trading day of the week, snapping two consecutive days of the losing streak. A goodish rebound in the global equity markets undermined the safe-haven Japanese yen. This, in turn, was seen as a key factor that assisted the USD/JPY pair to stall this week's retracement slide from the 110.45 region, or the highest level since August 13.

Bulls further took cues from a modest uptick in the US Treasury bond yields, which extended some support to the US dollar. Apart from this, expectations that the Fed would begin rolling back its massive pandemic-era stimulus sooner rather than later further acted as a tailwind for the greenback. The market expectations were reinforced by Thursday's release of US Jobless Claims data and hawkish comments by Fed Governor Michelle Bowman.

The combination of factors remained supportive of the intraday uptick and support prospects for a further appreciating move for the USD/JPY pair. A subsequent move back above the 110.00 mark will reaffirm the positive outlook and allow bulls to challenge the top boundary of a near four-week-old trading range resistance, around the 110.20-25 supply zone. This is closely followed by weekly swing highs, around the 110.45 region.

Market participants now look forward to the release of the US Producer Price Index for some impetus later during the early North American session. This, along with the US bond yields, could influence the USD price dynamics. Apart from this, the broader market risk sentiment might also produce some trading opportunities around the USD/JPY pair.

Technical levels to watch