USD/JPY climbs further beyond 110.00 mark, over one-week tops after upbeat NFP

• USD/JPY gained strong follow-through traction for the third consecutive session on Friday.
• The greenback got an additional boost following the release of the stellar US jobs report.
• Rallying US bond yields, a positive risk tone undermined the JPY and remained supportive.

The USD strengthened across the board in reaction to the blockbuster NFP report and pushed the USD/JPY pair beyond the key 110.00 psychological mark, or over one-week tops in the last hour.

The pair caught some aggressive bids during the early North American session after the latest US monthly jobs report showed that the economy added 943K new jobs in July. The reading surpassed even the most optimistic estimates and was complemented by a sharp revision of the previous month's reading to 938K from 850K reported earlier.

Further details revealed that the US unemployment rate dropped from 5.9% in June to 5.4% during the reported month, beating expectations of 5.7%. There was also good news on the wage front as average hourly earnings surge 4.0% YoY, marking another step toward the Fed's goal of substantial further progress in the labor market recovery.

Nevertheless, the blockbuster report validated market expectations that the Fed will start tapering its asset purchases sooner rather than later. This was evident from a sharp spike in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond jumped to the 1.28% threshold and further underpinned the USD.

Apart from this, a generally positive tone around the equity markets dented demand for the safe-haven Japanese yen. This was seen as another factor that assisted the USD/JPY pair to prolong this week's solid rebound from the lowest level since late May and gain strong follow-through traction for the third consecutive session.

It, however, remains to be seen if bulls are able to capitalize on the move or opt to take some profits off the table. Worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery might act as a headwind for the USD/JPY pair and cap any further gains, warranting caution before positioning for any further gains.

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