USD/JPY clings to gains near session tops, around 109.75-80 region

• A combination of factors assisted USD/JPY to regain some positive traction on Wednesday.
• An uptick in the US bond yields benefitted the USD and provided a modest lift to the pair.
• The underlying bullish sentiment undermined the safe-haven JPY and remained supportive.

The USD/JPY pair maintained its bid tone through the early European session and was last seen hovering just below daily tops, around the 109.75 region.

The pair edged higher during the first half of the trading action on Wednesday and moved away from one-week lows, around the 109.40 area touched in the previous day. The uptick was supported by a modest US dollar strength and a generally positive risk tone, which tends to undermine demand for the safe-haven Japanese yen.

The USD stalled its recent sharp retracement slide from a nine-and-half-month high amid expectations that the Fed could still begin rolling back its pandemic-era stimulus in 2021. Bulls further took cues from some follow-through uptick in the US Treasury bond yields, which further extended some support to the greenback and the USD/JPY pair.

Meanwhile, The global risk sentiment got a lift after China said that it had stopped the community spread of COVID-19, which restored confidence in the country's growth dynamics. Adding to this, the US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and boosted investors' appetite for riskier assets.

Despite the supporting factors, the uptick lacked strong bullish conviction as investors preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. Powell's remarks will be scrutinized for clues about the likely timing of the Fed's tapering plan, which will drive the USD in the near term.

In the meantime, traders might take cues from Wednesday's release of the US Durable Goods Orders data. This, along with the US bond yields, might influence the USD price dynamics and provide a fresh impetus to the USD/JPY pair. Apart from this, the broader market risk sentiment might also produce some short-term trading opportunities.

Technical levels to watch