The USD/JPY pair moved in a positive direction for the first time in four sessions on Tuesday as traders turned slightly more bullish on news of a potential fiscal stimulus package and strong US Treasury bond yields.
After a recent slump that pushed the pair to four-month lows, USD/JPY made a modest recovery during the opening hours of the European session on Tuesday.
The gains pushed the pair past the mid-150.00 mark where it remained steady.
USD/JPY had opened at 105.37 before rising by 0.21% to 105.59.
The concentration of demand pauses the recent downward trend for the pair, which has had bearish signals since early 2020.
Renewed support was driven by encouraging news stateside where US senators discussed a fiscal stimulus package that could aid economic recovery.
There was also an uptick in US Treasury bond yields.
The 10-year Treasury note climbed to 0.6266% on Tuesday morning while the 30-year Treasury bond also rose (1.2791%).
Although there were gains for USD/JPY, there are concerns that the deteriorating Sino-US relationship could prevent a notable breakout in the coming days.
Investors are also worried about the second wave of coronavirus cases in the US and the potential impact on the economy.
All eyes are now on the Federal Reserve as market watchers wait to see whether it will intervene again and expand stimulus measures.
While USD/JPY is showing shoots of recovery, the uncertainty is likely to prevent particularly bullish moves for the time being.
Instead, investors may want to wait for confirmation of the pair bottoming out with the view to a more sustainable recovery in the near term.
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