USD/JPY clings to gains above 106 after disappointing US ADP data

• USD/JPY continues to trade in the positive territory above 106.00.
• US Dollar Index largely ignored the ADP Employment Change data.
• Federal Reserve will release its Beige Book later in the day.

The USD/JPY pair climbed to a five-day high of 106.29 on Wednesday but struggled to push higher in the early American session. After retreating toward 106.00 with the initial reaction to the ADP Employment Change data from the US, the pair regained traction and was last seen trading at 106.25, up 0.28% on the day. 

DXY continues to climb toward 93.00

In its monthly report, the ADP Research Institue revealed that private sector employment in the US increased by 428,000 in August. This reading missed the market expectation of 950,000 by a wide margin. On a positive note, July's reading of 167,000 got revised up to 212,000.

The US Dollar Index (DXY) edged lower to 92.50 after the data but didn't have a tough time extending its daily rally. As of writing, the DXY was up 0.48% on the day at 92.75.

Meanwhile, the 10-year US Treasury bond yield is up nearly 2% on a daily basis, providing an additional boost to USD/JPY. Furthermore, the S&P 500 futures are rising 0.6% to confirm the risk-on market environment. Wall Street's main indexes are likely to open sharply higher and USD/JPY could preserve its bullish momentum if risk flows continue to dominate the markets in the second half of the day.

Later in the day, the US Federal Reserve will publish its Beige Book. Additionally, NY Fed President John Williams and Cleveland Fed President Loretta Mester are scheduled to deliver speeches.

Technical levels to watch for