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  • The upbeat market mood helped USD/JPY to gain some traction on Thursday.
  • Some renewed USD selling, worsening US-China relations capped the upside.
  • Traders await a trading range break out before placing fresh directional bets.

The USD/JPY pair edged higher on Thursday but lacked any strong follow-through, with bulls still awaiting a sustained move beyond 50-day SMA.

The recent optimism over a potential COVID-19 vaccine and hopes of a global economic recovery remained supportive of the upbeat market mood. This, in turn, undermined the Japanese yen’s safe-haven demand and provided a modest lift to the USD/JPY pair.

Despite the uptick, marking the second day of a mildly positive tone, the pair held well within a near two-week-old trading range. investors seemed reluctant to place any aggressive bullish bets amid growing concerns about worsening US-China relations.

It is worth reporting that the US Secretary of State Mike Pompeo on Wednesday revoked Hong Kong’s special status and said that it was no longer autonomous from China. The development added to the recent escalation of diplomatic tensions between the US and China.

This coupled with some renewed US dollar selling further contributed towards capping gains for the USD/JPY pair. Investors also seemed to wait for a fresh catalyst before positioning for the next leg of a directional move.

Moving ahead, market participants now look forward to important US macro data for a fresh impetus. Thursday’s US economic docket highlights the release of the second estimate of Q1 GDP, Durable Goods Orders for April and the Initial Weekly Jobless Claims.

The data will influence the USD price dynamics and produce some meaningful trading opportunities. Meanwhile, traders are likely to wait for a sustained break through the trading range before confirming the USD/JPY pair’s near-term trajectory.

Technical levels to watch