USD/JPY climbs to 114.00 neighbourhood, highest since November 2018

• USD/JPY added to the overnight positive move and gained follow-through traction on Friday.
• A combination of factors undermined the safe-haven JPY and remained supportive of the move.
• A subdued USD price action did little to hinder the ongoing bullish trajectory to multi-year tops.

The USD/JPY pair refreshed multi-year tops during the Asian session, with bulls now awaiting a sustained move beyond the 114.00 round-figure mark.

The pair built on the previous day's positive move and gained some follow-through traction on the last trading day of the week. The momentum pushed the USD/JPY pair to the highest level since November 2018 and was sponsored by a heavily offered tone surrounding the Japanese yen (JPY).

The Japanese government – in the October economic report – slashed its view on exports for the first time in seven months. This, along with the prevalent risk-on mood, undermined the JPY's safe-haven demand. Bulls further took cues from a modest uptick in the US Treasury bond yields.

This, to a larger extent, helped offset a subdued US dollar price action and did little to hinder the ongoing positive momentum. The USD witnessed a typical 'buy the rumour, sell the fact' kind of trade following the release of a slightly stronger US CPI report on Wednesday.

Investors seem unconvinced about a sustained period of inflation, which was reinforced by a sharp pullback in the longer-dated US Treasury bond yields. That said, prospects for an early policy tightening by the Fed acted as a tailwind for the US bond yields and the USD.

The minutes of the September FOMC meeting reaffirmed that the Fed remains on track to begin tapering its bond purchases in 2021. Moreover, the markets have been betting on the possibility of a potential interest rate hike in 2022 amid fears about a faster than expected rise in inflation.

The market focus now shifts to the release of US monthly Retail Sales figures, which, along with the US bond yields, will influence the USD price dynamics. Apart from this, the broader market risk sentiment might produce some meaningful trading opportunities around the USD/JPY pair.

Technical levels to watch