USD/JPY sits near multi-month tops, around mid-111.00s

• USD/JPY regains some traction and climbs back closer to multi-month tops.
• Softer risk tone, weaker US bond yields seemed to keep a lid on the upside.

The USD/JPY pair reversed an early dip to the 111.00 neighbourhood and has now moved back closer to multi-month tops, set in the previous session.

The pair on Wednesday rallied hard, gaining around 175 pips from intraday lows, and surged past the 111.00 round figure mark with ease for the first time since May 2019. Against the backdrop of fading safe-haven demand, the positive momentum was fueled by the ongoing US dollar upsurge and some aggressive short-covering.

Bulls digest overnight upsurge

Despite mounting concerns about the economic impact of the coronavirus outbreak in China, a slowdown in the number of new cases infected by the deadly virus led to a recovery in the global risk sentiment. This was evident from a positive mood around equity markets, which eventually undermined the Japanese yen's safe-haven demand.

On the other hand, the already stronger sentiment surrounding the greenback got an additional boost on Wednesday following the release of better-than-expected US economic releases – Producer Price Index (PPI) and housing market data. Meanwhile, the minutes of the latest FOMC meeting turned out to be a non-event for the market and did little to influence.

Bulls took some breather during the Asian session on Thursday amid a mildly softer tone surrounding the US Treasury bond yields. Meanwhile, the downside remained cushioned, rather attracted some dip-buying interest after the PBoC announced the expected interest rate cut.

Moving ahead, market participants now look forward to the US economic docket, featuring the release of the usual weekly unemployment claims and the Philly Fed Manufacturing Index. The data might influence the USD price dynamics and contribute towards producing some meaningful trading opportunities later during the early North-American session.

Technical levels to watch