USD/JPY clings to strong gains near two-month tops, NFP in focus

The USD/JPY pair was seen consolidating Asian session spike to near two-month highs and was last seen trading around 113.70-75 band. 

The pair caught fresh bids and jumped to the highest level since mid-May after BOJ bought 500 billion Yen of Japanese government bonds to drive the yield on the benchmark 10-year bond to around zero percent. The amount represents an increase of 50 billion Yen from previous buying operation of 450 billion and weighed heavily on the Japanese Yen.

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Meanwhile, the market seems to have digested Thursday's softer ADP report on the US private sector employment and a modest pick-up in the US Dollar demand further collaborated to the strong bid tone surrounding the major.

The pair has now broken out of three-day-old trading range and also seems to have confirmed a fresh bullish break through a short-term descending trendline resistance near 113.30-35 region, thus increasing prospects for an additional near-term appreciating move. 

Traders, however, are likely to wait for the release of the key NFP data, due later during the NA session, before placing any fresh directional bets. Moreover, the prevalent risk-off environment remains supportive for the Japanese Yen's safe-haven appeal and the combination might eventually lead to further consolidative price action through European trading session. 

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Technical outlook

Omkar Godbole, Analyst and Editor at FXStreet writes: "A day end close above 113.69 would open doors for rally to 115.50 (Mar 10 high). Dip to 10-DMA of 112.78 due to weak US wage growth figures is likely, although it would be short lived, given the 5-DMA and 10-DMA are still sloping upwards. The RSI is yet to hit the overbought territory as well."