USD/JPY continues to flirt with 114.00 level ahead of Japan mega stimulus

• USD/JPY upbeat, Japan’s 56 trillion yen ($490 billion) stimulus is around the corner.
• USD/JPY hovers around the 114.00 level during Asian trading hours.
• The currency pair is riding on the back of improved 10-year US T-bond yields.

USD/JPY continues to hover around the 114.00 level on Friday. At the time of press, the currency pair is trading at 114.34, up 0.07%. The currency pair has performed marginally well on the back of improved 10-year US Treasury Yields, which is currently trading up by 1.59%. Experts believe a rebound reason could be the dip-buying in a 2021 trend being followed by the USD/JPY investors.

Previously, on Wednesday, the USD/JPY suffered a blow after the US Treasury yields took a dip. However, the pair gained some strength the next day, and since then, it has been flirting with 114.00 levels.          

In addition to this, news coming out from Tokyo about the COVID-19 stimulus package also creates ripples in the FX. A Reuters report had stated that Japan is all set to compile a record 56 trillion yen fiscal stimulus package, due for later in the day. The stimulus is aimed to cushion Japan’s pandemic-hit economy, resisting globally followed tapering measures.

USD/JPY is trading at its multi-yearly high on Wednesday at around 114.81, the strongest since October 20 and then pulled back modestly. The pair is heading towards a major resistance barrier of 115.00. At the time of reporting, it peaked at 114.93 with a low of 114.78. The combination of higher US T-bond yields, rising equity prices and a rally of the US dollar across the board take up more ground.

The US dollar charm has run out of steam and has lost the zeal compared to the local currency Yen. The dollar Index’s pullback from the 16-month highs with the index dropping back to the 95.50s in the Asia Pacific trading session.

Also, USD/JPY seems to feed on the upbeat data from the US besides the latest stimulus package and continue recovering Wednesday’s lost ground. US economic data released on Thursday was positive, with weekly initial jobless claims falling to a fresh post-pandemic low at 269K and the Philadelphia Fed manufacturing survey showing an improvement in business conditions.

The economic calendar for Japan on Friday is empty ahead. But, USD/JPY will surely gather incentives from Fed Vice Chairman Richard Clarida and Christopher Waller speeches.

USD/JPY technical levels