USD/JPY trades up to 111.90 going into European trading

In the run up to the US non-farm payrolls release later, higher yields is the key story in the market and that is underpinning yen pairs for the time being.

USD/JPY W1 08-10

That is seeing USD/JPY keep around 111.90 currently as buyers look towards another test of 112.00 ahead of the weekend. The high last week hit 112.08 but there was no firm daily/weekly break before it all came falling back down as risk sentiment softened.

This time around, risk is keeping steadier on the week so far but the key risk event in the US non-farm payrolls still remains. As such, we are likely to only get a better sense of any potential upside break until after the key release later today.

As much as yields are likely to jump higher on a strong report, I'd argue that there is some propensity for profit-taking activity in bonds after the technical breakout from last month but maybe perhaps if any immediate selling today stretches too far.

That said, it would be tough to ignore the technicals in USD/JPY and a firm break above 112.00 will pave the way for the next push towards 114.00. In turn, that should bolster sentiment in the dollar and in other yen pairs too as a result.

However, a softer report will validate the key resistance at 112.00 for now if yields retrace ahead of the weekend but it is not likely to derail Fed taper expectations.