- USD/JPY gains traction for the second straight session on Tuesday, albeit lacked follow-through.
- A positive tone in the equity markets undermined the safe-haven JPY and remained supportive.
- A subdued USD demand held bulls from placing fresh bets and capped the upside for the major.
The USD/JPY pair spiked to one-week tops, around the 105.60 region during the Asian session, albeit lacked any strong follow-through and retreated few pips thereafter.
The pair added to the previous day’s modest gains and edged higher for the second consecutive session on Tuesday. The uptick marked the third day of a positive move in the previous four and was sponsored by a positive tone around the US equity futures, which tend to undermine demand for the safe-haven Japanese yen.
However, a subdued US dollar price action kept a lid on any further gains for the USD/JPY pair, at least for the time being. The USD bulls refrained from placing any aggressive bets ahead of a looming deadline to pass a wide-ranging coronavirus relief package and concerns about the risk of a disputed US election outcome.
It is worth reporting that the US House Speaker Nancy Pelosi has set a Tuesday deadline to reach a deal with Republicans on economic stimulus. Investors, however, remain unconvinced that the measures will be passed by the US Congress by the end of the self-imposed deadline. On the political front, the incumbent President Donald Trump and Democrat challenger Joe Biden are due to face off in a final debate on Thursday.
Despite the negative factors, the USD/JPY pair has still managed to hold with decent daily gains around mid-105.00s. However, bulls are likely to wait for some follow-through buying beyond the 105.60-65 region before positioning for any further appreciating move, possibly towards reclaiming the 106.00 round-figure mark.
Market participants now look forward to the US economic docket, featuring the release of Building Permits and Housing Starts. The data, along with the broader market risk sentiment, developments surrounding the US fiscal stimulus and the coronavirus saga, might influence the USD/JPY pair and produce some meaningful trading opportunities.
Technical levels to watch
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