USD/JPY climbs to 105.00 neighbourhood, highest since mid-November

• USD/JPY reversed an early dip to 104.60 region and turned positive for the fourth straight day.
• The upbeat market mood undermined the safe-haven JPY and was seen driving the pair higher.
• A goodish pickup in the USD demand helped off sliding US bond yields and remained supportive.

The USD/JPY pair shot to two-and-half-month tops during the mid-European session, with bulls now eyeing to reclaim the key 105.00 psychological mark.

A combination of factors assisted the pair to attract some dip-buying near the 104.60 region and move back into the positive territory for the fourth consecutive session on Monday. As the retail-inspired pressure on hedge funds shifts towards silver, a solid rebound in the equity markets undermined demand for the safe-haven Japanese yen.

Apart from this, a goodish pickup in the US dollar demand provided an additional boost to the USD/JPY pair and remained supportive of the intraday positive move. Disagreements over the US President Joe Biden’s proposed $1.9 trillion stimulus plan and delays in vaccine rollouts benefitted the greenback's status as the global reserve currency.

It is worth reporting that ten Republican US senators urged Biden on Sunday to significantly downsize his proposed COVID-19 stimulus package and reportedly floated a $600 billion alternative to garner bipartisan support. This, in turn, further raised doubts about the timing and size of the new US economic stimulus measures.

Meanwhile, fading hopes for rapid approval of additional US fiscal stimulus led to a fresh leg down in the US Treasury bond yields. This might turn out to be a key factor that might hold the USD bulls from placing aggressive bets and keep a lid on any runaway rally for the USD/JPY pair, at least for the time being.

This makes it prudent to wait for some strong follow-through before positioning for any further appreciating move for the USD/JPY pair. Market participants now look for the US economic docket, highlighting the release of ISM Manufacturing PMI, which might influence the USD and produce some meaningful trading opportunities.

Technical levels to watch