USD/JPY closes higher for third day in a row on rising bond yields

• Yen declining against strengthening US Dollar.
• USD getting boosted by rising bond yields.

USD/JPY closed higher for a third consecutive day to end Tuesday's trading, entering the overnight session trading just beneath Tuesday's high of 107.37.

With China's institutions still off to celebrate Chinese New Year, the Asia session will continue to have limited volumes. The US and Canadian markets also had the start of the week off, but traders returned Tuesday and the theme was decidedly USD-positive, with the US Dollar gaining against the major bloc of currencies, spurred on by the continued lift in bond yields. The 2-year Treasury note hit its highest value since 2008, and the 10-year is also trading near a four-year high, and the Dollar can expect continued support from the bond markets as yields increase in the face of rising inflation.

Wednesday will see the Nikkei Manufacturing PMI at 00:30 GMT, followed by a speech by Bank of Japan (BoJ) Board Member Funo at 01:10, and the Industrial Activity Index at 04:30, with foreign investment figures rolling in much later at 23:50. The US sees Markit PMI data at 14:45, with the FOMC Minutes due at 19:00.

USD/JPY Technicals

Daily candles show the pair challenging the 8 EMA, and strong bullish potential from the hammer signal dropped on Friday. H4 charts have the pair trading just over the 34 EMA, but volumes remain thin and the price has remained trapped under 107.37; support is being provided by 106.82 and 105.66, with resistance built in at 107.56 and 108.15.