USD/JPY remains confined in a range around mid-107.00s

• A combination of diverging forces failed to provide any meaningful impetus to USD/JPY.
• The upbeat market mood undermined the safe-haven JPY and helped limit the downside.
• Concerns about surging coronavirus cases might continue to keep a lid on any move up.

The USD/JPY pair lacked any firm directional bias and remained confined in a narrow trading band, around mid-107.00s through the early European session. A combination of diverging forces failed to assist the pair to capitalize on the previous day’s modest uptick and led to a subdued/range-bound price action on the last trading day of the week.

Optimism over a potential COVID-19 vaccine, coupled with reviving hopes of a V-shaped global economic recovery remained supportive of the upbeat market mood. Friday’s upbeat China Caixin Services PMI added to Thursday’s stronger-than-expected US monthly jobs report and offered further evidence that the worse of the coronavirus pandemic was probably over.

The risk-on flow undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair. However, the ever-increasing number of coronavirus cases fueled concerns about renewed lockdown measures to contain the spread. This, in turn, held investors from taking excessive risk and kept a lid on any strong gains for the major, at least for the time being.

Traders also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines amid relatively thin liquidity conditions. Given that the US markets will remain closed in observance of Independence Day, the USD/JPY pair seems more likely to prolong its sideways consolidative price action and end with modest gains for the second consecutive week.

Technical levels to watch