- USD/JPY struggled to gain any meaningful traction and remained confined in a range.
- The US political uncertainty kept the USD bulls on the defensive and capped the upside.
- The upbeat market mood undermined the safe-haven JPY and might help limit losses.
The USD/JPY pair lacked any firm directional bias and remained confined in a range through the Asian session on Tuesday. The pair was last seen trading near session lows, around the 104.60 region, albeit lacked any strong follow-though selling.
A combination of diverging forces failed to provide any meaningful impetus to the major and led to a subdued/range-bound price moves through the first half of the trading action. Despite concerns about the potential economic fallout from coronavirus-induced lockdowns in Western countries, the upbeat market mood undermined demand for the safe-haven Japanese yen and helped limit the downside for the USD/JPY pair.
On the other hand, the US dollar bulls refrained from placing fresh bets, rather preferred to wait on the sidelines amid uncertainty over the outcome of the US presidential election. Opinion polls have been indicating a lead for Democrat challenger Joe Biden. Investors, however, refrained from betting on a particular result as the gap in key battleground states is very narrow. This, in turn, capped any meaningful upside for the USD/JPY pair.
From a technical perspective, the pair failed ahead of the key 105.00 psychological mark on the first day of a new week. The subsequent downtick suggested that the recent bounce from the vicinity of the 104.00 mark, or over one-month lows might have already run out of the steam, warranting some caution for bullish traders.
That said, it will still be prudent to wait for some strong follow-though selling before traders again start positioning for the resumption of the near-term downward trajectory. Conversely, a sustained strength beyond the 105.00 mark will negate the bearish outlook and pave the way for additional gains, possibly towards the 105.50-60 supply zone.
Technical levels to watch
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