USD/JPY surges to 109 on higher risk appetite

The JPY extends losses against the greenback in the NA session amid improved market sentiment. At the moment, the pair is up 0.33% at 109.02, recording a gain of 90 pips on the day.

The higher risk appetite is seen in the stock indexes in the US as well as in the bond yields. U.S. stocks were able to build on a positive start on Monday. The Dow Jones Industrial Average is up 0.8% on the day while the S&P 500 is adding 0.7%. U.S. Treasuries are struggling to find as demand as havens and offering higher yields in return. At the moment, the 10-year bond yield is at 2.26%, up 1.4% on the day.

Moreover, rising yields also help the US Dollar Index correct its losses, giving an additional boost to the USD/JPY pair. The DXY has stayed under pressure most of the day as last Friday's weak inflation numbers lowered the expectations of the Fed going for more than two rate hikes. There are no macro data to follow during the Asian session and the market sentiment could continue to drive the price action.

Technical outlook

The initial hurdle for the USD/JPY aligns at 109.70 (200-DMA) followed by 110 (psychological level) and 110.35 (20-DMA). On the downside, 108.12 (daily/five-month low) could be seen as the first near-term support before 107.60 (Nov. 15 low) and 107 (psychological level).

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