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  • The ongoing USD bullish run continues to lend some support and help  limit the downside.
  • Worries about the global economy benefited JPY’s safe-haven status and capped gains.

The USD/JPY pair seesawed between tepid gains/minor losses on Tuesday and remained confined in a narrow trading band, below mid-106.00s.
The pair ticked lower at the start of a new trading week amid reviving safe-haven demand on the back of a new round of US-China tariffs. On Sunday, tariffs of 15% on $110 billion of Chinese imports took effect while retaliatory tariffs from China also kicked in. Meanwhile, the downtick turned out to be short-lived, rather was quickly bought into in the wake of resurgent US Dollar demand.

Diverging factors fail to provide any impetus

Renewed hopes of a potential trade deal between the world’s two largest economies continued boosting investors’ appetite for riskier assets. The risk-on mood allowed the US Treasury bond yields to recover further from multi-year lows, which underpinned the greenback demand and seemed to be one of the key factors behind the pair’s steady intraday bounce of around 45-50 pips.
Bulls, however, failed to capitalize on the uptick and lacked any strong conviction. Concerns about the global economic growth continued benefitting traditional safe-haven currencies, like the Japanese Yen, which coupled with holiday-thinned liquidity conditions further collaborated towards keeping a lid on any strong follow-through up-move for the major, at least for the time being.
The pair extended its sideways movement through the early European session on Tuesday, awaiting fresh developments on the US-China trade front. In the meantime, Tuesday’s US economic docket – highlighting the release of ISM manufacturing PMI – will be looked upon for some short-term trading opportunities later during the early North-American session.

Technical levels to watch