USD/JPY spikes to fresh YTD peak on better-than-expected US Jobless Claims data

• USD/JPY regains strong positive traction on Thursday and climbs to a fresh YTD peak.
• The upbeat US macro data reaffirms hawkish Fed expectations and underpin the USD.
• A positive risk tone weighs on the safe-haven JPY and remains supportive of the move.

The USD/JPY pair catches some bids during the early North American session and jumps to a fresh YTD peak, around the 135.35 region in the last hour.

The latest leg of a sudden spike follows the upbeat US data, which showed that Initial Jobless Claims unexpectedly fell to 192K during the week ended February 17. This further points to the underlying strength in the US labour market, which, along with persistently high inflation, should allow the Fed to continue hiking interest rates for longer. This, to a larger extent, offsets a downward revision of the US Q4 GD, which showed that the world's largest economy expanded by a 2.7% annualized pace against the 2.9% rise estimated previously.

Nevertheless, hawkish Fed expectations remain supportive of elevated US Treasury bond yields and continue to lend support to the US Dollar. This, in turn, is seen as a key factor pushing the USD/JPY pair higher. Apart from this, a modest recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - undermines the safe-haven Japanese Yen (JPY) and provides an additional boost to the major. The momentum could also be attributed to some technical buying above the 135.00 psychological mark.

It, however, remains to be seen if bulls can capitalize on the move or opt to lighten their bets as the market focus now shifts to the Bank of Japan (BoJ) Governor candidate Kazuo Ueda's testimony on Friday. Investors will closely scrutinize Ueda's view on the future of yield curve control (YCC) and super-easy monetary policy. This, in turn, will play a key role in driving the JPY in the near term and determine the next leg of a directional move for the USD/JPY pair.

Technical levels to watch