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  • USD/JPY attracts some dip-buying and turns positive for the second straight session.
  • Stability in the equity markets undermined the safe-haven JPY and remained supportive.
  • The US political uncertainty, lack of additional US fiscal stimulus might cap the upside.

The USD/JPY pair bounced over 20 pips from Asian session lows and was last seen hovering near the top end of its daily range, around mid-105.00s.

Signs of stability in the equity markets undermined demand for the safe-haven Japanese yen, which, in turn, was seen as one of the key factors that assisted the USD/JPY pair to reverse an early dip to the 105.30 region. The pair has now moved into the positive territory for the second consecutive session, albeit lacked any strong follow-through buying and remained well within the previous day’s broader trading range.

Investors remain cautious on the back of a setback in the development of a vaccine for the highly contagious coronavirus diseases. In fact, Johnson & Johnson suspended clinical trials for its COVID-19 vaccine on Monday due to an unexplained illness. This comes amid fading hopes about the next round of the US fiscal stimulus measures and the US political uncertainty, which held the USD bulls from placing aggressive bets.

It will now be interesting to see if the USD/JPY pair is able to build on the modest intraday positive move or meets with some fresh supply at higher levels. Market participants now look forward to the release of the US PPI figures, which, along with speeches by FOMC member, will influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

Technical levels to watch