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  • USD/JPY erases losses but recovery lacks follow-through.
  • USD weakness and cautious trading in equities cap the upside.
  • All eyes on risk trends and US Factory data for fresh impulse.

USD/JPY is attempting a recovery from daily lows of 105.83 but the bulls lack follow-through upside bias amid ongoing weakness in the US dollar across its main competitors.

The caution trading seen in the European equities combined with the drop in the S&P 500 futures also limits the recovery attempts in the spot just above the 106 level.

The greenback stalled its comeback and resumed the selling bias as the coronavirus resurgence continues to cast a cloud on the economic recovery prospects, especially after the upbeat US ISM Manufacturing PMI threw some rays of hope.

Meanwhile, the impending US fiscal stimulus deal combined with falling US real yields keep the USD sellers alive and kicking.

On the JPY-side of the equation, the yen traders ignore the domestic macro news while drawing some support from the Bank of Japan’s (BOJ) Governor Haruhiko Kuroda’s recent comments.

Kuroda said early Tuesday, BOJ may consider extending a March 2021 deadline for lending facilities aimed at channeling funds to companies hit by the coronavirus pandemic. This came amid rising new infections across Japan, with Tokyo – the worst hit.

Next of relevance remains the US Factory Orders and virus data for near-term trading opportunities in the major. The sentiment on the global stocks amid stimulus expectations will also have a significant bearing on USD/JPY.

USD/JPY technical levels

“In a case where the USD/JPY prices cross 106.60, 107.55 and July month top close to 108.15 will grab the market attention. Meanwhile, a daily closing below 10-day SMA level of 105.82 can take rest on 105.30 before revisiting the five-month lows near 104.20,” explains Anil Panchal, FXStreet’s analyst.

USD/JPY additional levels