USD/JPY flirts with daily high, around 122.75 region post-US NFP report

• USD/JPY regained positive traction on Friday and snapped three successive days of the losing streak.
• The risk-on mood, Fed-BoJ policy divergence weighed on the JPY and continued lending support.
• Elevated US bond yields, mostly upbeat US NFP data underpinned the USD and favours bullish traders.

The USD/JPY pair held on to its intraday gains, above the mid-122.00s through the early North American session and had a rather muted reaction to the US monthly jobs report.

The headline NFP print showed that the US economy added 431K jobs in March as against 490K expected, though the disappointment was offset by an upward revision of the previous month's reading to 750K. Additional details revealed that the unemployment rate dropped to 3.6% from 3.8% in February and Average Hourly Earnings grew 0.4% from the 0.1% previous.

The data reaffirmed market bets that the Fed would hike interest rates by 100 bps over the next two meetings to combat stubbornly high inflation. This was reinforced by elevated US Treasury bond yields, which underpinned the US dollar. On the other hand, the Japanese yen was weighed down by the Bank of Japan's commitment to aggressively defend its 0.25% yield cap.

This, along with a generally positive tone around the equity markets, dented demand for safe-haven JPY and acted as a tailwind for the USD/JPY pair. Therefore, the USD/JPY posted the first daily gain in the previous four and assisted the pair to stall its pullback from levels above the 125.00 psychological mark, or the highest since August 2015 touched earlier this week.

With Friday's key data out of the way, the market focus shifts back to fresh developments surrounding the Russia-Ukraine saga. The incoming headlines will influence the broader market risk sentiment, which along with the US bond yields and the USD price dynamics, should provide some impetus to the USD/JPY pair and allow traders to grab some short-term opportunities.

Technical levels to watch