USD/JPY remains on the defensive, holds above mid-103.00s

• USD/JPY witnessed some selling during the first half of the trading action on Tuesday.
• Progress on additional US stimulus weighed on the USD and exerted some pressure.
• The risk-on mood undermined the safe-haven JPY and helped limit any further losses.

The USD/JPY pair traded with a mild bias through the Asian session, albeit lacked any follow-through selling and has managed to hold above mid-103.00s.

The pair edged lower during the first half of the trading action on Tuesday and eroded a part of the previous day’s goodish positive move to over one-week tops. The downtick was exclusively sponsored by the emergence of some fresh selling around the US dollar, though the upbeat market mood helped limit deeper losses.

The USD struggled to capitalize on the overnight rebound and languished near two-and-half-year lows amid progress on additional US stimulus. The House of Representatives voted to increase the amount of stimulus payments to qualified Americans from $600 to $2,000 on Monday and sent the measure to the Senate for a vote.

This comes on the back of the latest optimism over the last-minuted Brexit trade deal, which further boosted investors’ confidence. This was evident from the prevalent bullish sentiment around the equity markets, which undermined demand for the safe-haven Japanese yen and helped limit any further losses for the USD/JPY pair.

This, in turn, warrants some caution for aggressive bearish traders and before positioning for any further depreciating move amid relatively thin liquidity conditions. The USD/JPY pair was last seen trading around the 103.70 region and remains at the mercy of the broader market risk sentiment and the USD price dynamics.

Technical levels to watch