USD/JPY bullish on JGB weakness as gold rally supports risk sentiment

USD/JPY advanced 0.3% to 157.45 as Japanese Government Bond (JGB) yields rose, weakening the yen's appeal amid a broader shift in market dynamics. The 10-year JGB yield climbed 5 basis points to 1.08%, its highest level in six months, reducing the currency's attractiveness for carry trades. Gold's record-breaking rally to $2,080 per ounce paradoxically supported risk sentiment as investors view the precious metal's strength as indicative of controlled inflation expectations rather than crisis concerns. Small-cap focused strategies gaining traction for 2025 suggest improved risk appetite, with USD/JPY benefiting from the optimistic outlook. The pair found support at 157.00 and faces resistance at 158.00, with momentum indicators favoring further upside. Traders should watch upcoming Bank of Japan communications and US Treasury yields, as any divergence in monetary policy expectations could accelerate USD/JPY gains toward the 159.00 level.