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USD/JPY rises toward 111 as Wall Street rallies following Christmas break

  • Wall Street rises sharply on Wednesday, Nasdaq adds more than 3%.
  • The 10-year U.S. T-bond yield gains nearly 1%.
  • US Dollar Index recovers toward the 97 mark.

With the markets returning to action following the Christmas break, the USDJPY pair gained traction and staged a decisive recovery from the 4-month low it set earlier this week. As of writing, the pair was up 0.55% on the day at 110.90.

The combination of a stronger greenback and an improved market sentiment fuel the pair's rally on Wednesday. Boosted by a 1% increase in the 10-year Treasury bond yield, the US Dollar Index, which slumped to mid-96s on Tuesday, rose toward the 97 mark and was last seen up 0.4% on the day at 96.96.

Additionally, the improved market sentiment as reflected by the strong performance of major equity indexes in the U.S. weighed on demand for safe-havens such as the JPY. Led by sharp increases witnessed in technology, consumer discretionary, and energy shares, both the Dow Jones Industrial Average and the S&P 500 add more than 2% on the day while the Nasdaq Composite is gaining 3.05%.

During the Asian session, the Bank of Japan governor Kuroda will be delivering a speech but the market sentiment is likely to remain as the sole driver in the near-term.

Technical levels to consider

The initial resistance for the pair aligns at 111.15 (Dec. 24 high) ahead of 111.60 (200-DMA) and 112.30 (20-DMA). On the downside, supports are located at 110.30 (daily low), 110 (psychological level) and 109.40 (Jun. 25 low).

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