USD/JPY looks to build on bullish momentum beyond 105.00 mark

• USD/JPY continued gaining traction for the fifth straight session on Tuesday.
• The risk-on mood undermined the safe-haven JPY and provided a modest lift.
• Positive US bond yields remained support, subdued USD demand capped gains.

The USD/JPY pair climbed to two-and-half-month tops during the early European session, with bulls now looking to build on the momentum beyond the key 105.00 psychological mark.

The pair built on last week's breakout momentum through a multi-month-old descending trend-line resistance and gained traction for the fifth consecutive session on Tuesday. The prevalent upbeat market mood undermined demand for the safe-haven Japanese yen and was seen as one of the key factors driving the USD/JPY pair higher.

The global risk sentiment got a lift amid renewed optimism about additional US fiscal stimulus, especially after Democrats filed a joint $1.9 trillion budget measure. The move was seen as a step toward bypassing Republicans, which, in turn, fueled hopes for a strong economic recovery and boosted investors' confidence.

Meanwhile, expectations of a larger government borrowing led to a modest uptick in US Treasury bond yields. This further inspired bullish traders and remained supportive of the bid tone surrounding the USD/JPY pair. However, a softer tone surrounding the US dollar might keep a lid on any runaway rally for the major, at least for now.

That said, the near-term bias remains tilted firmly in favour of bullish traders and supports prospects for a further appreciating move. Hence, any pullback towards the overnight swing lows, around the 104.60 region, which coincides with the trend-line resistance breakpoint, might still be seen as a buying opportunity.

There isn't any major market-moving economic data due for release from the US. Hence, the broader market risk sentiment will be looked upon for some impetus around the USD/JPY pair. Apart from this, the US bond yields might influence the USD price dynamics and assist traders to grab some short-term momentum play.

Technical levels to watch