- USD/JPY edged lower on Tuesday amid a subdued USD price action.
- Rallying US bond yields, the underlying bullish tone helped limit losses.
The USD/JPY pair traded with a mild negative bias through the early European session and was last seen hovering near the lower end of its daily range, around the 104.15-10 region.
The pair witnessed some selling during the first half of the trading action on Tuesday and for now, seems to have stalled its recent strong recovery move from multi-month lows. The downtick was solely led by a subdued US dollar price action, though a combination of supporting factors helped limit any deeper losses for the USD/JPY pair.
Hopes that President-elect Joe Biden would push for a multi-trillion-dollar stimulus package remained supportive of the underlying bullish sentiment in the financial markets. This, in turn, led to a modest uptick in the US equity futures, which undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair.
Bulls might further take cues from the ongoing rally in the US Treasury bond yields, triggered by expectations of a larger government borrowing. Investors have been pricing in the prospects for a more aggressive US fiscal spending in 2021, which pushed the yield on the benchmark 10-year bond to the highest level since March.
The positive factors, to some extent, were negated by the US political turmoil, wherein House Democrats plan to impeach President Donald Trump on Wednesday unless he steps down or is removed before then. This makes it prudent to wait for a sustained move in either direction before traders start positioning for any firm intraday move.
In the absence of any major market-moving economic releases from the US, the US bond yields might continue to play a dominant role in influencing the USD price dynamics. This, along with the broader market risk sentiment, could provide some impetus and allow traders to grab some short-term opportunities on Tuesday.
Technical levels to watch
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