USD/JPY clings to gains post-US data, remains below 114.00 mark

• USD/JPY gained positive traction on Friday and snapped two days of the losing streak.
• A strong pickup in the US bond yields revived the USD demand and remained supportive.
• The US PCE Price Index did little to impress bulls or provide any impetus to the major.

The USD/JPY pair maintained its bid tone through the early North American session and was last seen hovering near daily tops, just below the 114.00 mark. The pair moved little following the release of the US PCE Price Index.

Following an early dip to the 113.40-35 region, the USD/JPY pair attracted some buying on the last day of the week and snapped two successive days of the losing streak. The move was sponsored by a strong follow-through uptick in the US Treasury bond yields, which assist the US dollar to rebound from one-month lows touched in reaction to dismal US GDP print on Thursday.

The USD stood tall and had a rather muted reaction to a slight disappointment from the US Core PCE Price Index, which held steady at a 3.6% YoY rate in September as against an uptick to 3.7% anticipated. Nevertheless, the data validated expectations for an early policy tightening by the Fed and allowed the yield on the benchmark 10-year US bond yield to hold steady above the 1.60% threshold. This, in turn, acted as a tailwind for the greenback and the USD/JPY pair.

Meanwhile, the Fed's inflation gauge indicated that consumer cost pressures are getting entrenched. This comes on the back of signs of an economic slowdown and further fueled concerns about the risk of stagflation, which might continue to weigh on investors' sentiment. This should keep a lid on any optimistic move in the markets and benefit the safe-haven Japanese yen, capping any meaningful upside for the USD/JPY pair, at least for the time being.

Hence, it will be prudent to wait for a strong follow-through buying beyond the 114.00 mark before confirming that the recent corrective pullback has run its course. This will set the stage for a move beyond multi-year tops, around the 114.70 region touched last week, and push the USD/JPY pair further towards reclaiming the key 115.00 psychological mark.

Technical levels to watch