USD/JPY climbs further beyond 115.00 mark, fresh monthly high amid stronger USD

• USD/JPY gained some follow-through traction on Thursday and jumped to a fresh monthly high.
• Resurgent USD demand remained supportive of the move amid the underlying bullish sentiment. 
• A sustained move beyond the 115.00 mark might have already set the stage for additional gains.

The USD/JPY pair continued scaling higher heading into the European session and shot to a fresh monthly high, around the 115.15 region in the last hour.

A combination of supporting factors assisted the USD/JPY pair to prolong its uptrend witnessed since the beginning of this month and gain traction through the first half of the trading on Thursday. The underlying bullish sentiment in the financial markets continued undermining the safe-haven Japanese yen and acted as a tailwind for the USD/JPY pair.

The optimism led by signs that the Omicron variant might be less severe than feared helped offset worries about the economic impact of the continuous surge in new COVID-19 cases. This, in turn, boosted investors' appetite for perceived riskier assets, which was evident from an extension of the recent bullish run in the equity markets.

Bulls further took cues from the overnight spike in the US Treasury bond yields that followed soft demand for a $56 billion auction of seven-year notes. In fact, the yield on the benchmark 10-year US government bond shot back to 1.56% for the first time since November 29, while the two-year yield rose to the highest since March 2020.

This comes on the back of the Fed's hawkish outlook, indicating at least three rate hikes next year, and helped revive demand for the US dollar, which provided an additional boost to the USD/JPY pair. Apart from this, the momentum could further be attributed to some technical buying on a sustained strength beyond the key 115.00 psychological mark.

The mentioned handle coincided with a resistance marked by the top boundary of an upward sloping channel extending from the monthly swing low. A sustained strength beyond could be seen as a fresh trigger for bullish traders and might have already set the stage for a further near-term appreciating move amid thin end-of-year trading volumes.

Market participants now look forward to the US economic docket, featuring the releases of Weekly Initial Jobless Claims and Chicago PMI. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, traders will take cues from the broader market risk sentiment to grab some short-term opportunities around the USD/JPY pair.

Technical levels to watch