USDJPY trades with modest gains amid stronger USD, lacks follow-through beyond 140.00

• USDJPY gains some positive traction amid a modest USD uptick, though lacks follow-through.
• A goodish pickup in the US bond yields helps revive the USD demand and acts as a tailwind.
• The risk-off mood underpins the safe-haven JPY and caps any meaningful gains for the major.

The USDJPY pair continues to show resilience below the 139.00 round figure and regains some positive traction Thursday. The momentum lifts spot prices to a fresh daily top during the mid-European session, with bulls still awaiting a convincing breakout through the 140.00 psychological mark. 

The intraday uptick is sponsored by the emergence of some buying around the US Dollar, bolstered by a goodish pickup in the US Treasury bond yields. Wednesday's upbeat US Retail Sales data forces market participants to scale back their bets for a less aggressive policy tightening by the Federal Reserve and acts as a tailwind for the US bond yields.

Moreover, the US central bank is expected to hike interest rates by a relatively smaller 50 bps at the next meeting in December. In contrast, the Bank of Japan remains committed to its ultra-loose monetary policy, marking a big divergence in comparison to a more hawkish Fed. This, in turn, weighs on the Japanese Yen and further offers support to the USDJPY pair.

That said, a bout of global risk-aversion trade - as depicted by a generally weaker tone around the equity markets - seems to underpin the safe-haven JPY. This is holding back traders from placing aggressive bullish bets around the USDJPY pair, making it prudent to wait for strong follow-through buying before confirming that spot prices have formed a bottom.

Even from a technical perspective, the USDJPY pair, so far, has struggled to move back above the 141.00 confluence support breakpoint. The said handle should now act as a pivotal point and help determine the near-term trajectory for the USDJPY pair. Traders now look to the US macro releases - the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims.

Apart from this, speeches by a slew of influential FOMC members, along with the US bond yields, will drive the USD demand. Furthermore, the broader market risk sentiment might also contribute to producing short-term trading opportunities around the USDJPY pair.

Technical levels to watch