USD/JPY retreats to 103.50 area as US stocks erase early gains

• USD/JPY is edging lower during the American trading hours.
• Wall Street’s main indexes trade mixed on Tuesday.
• US Dollar Index stays in the negative territory near 90.00.

The USD/JPY pair spent the majority of the day moving sideways in a very tight range near 103.70 but came under modest bearish pressure during the American trading hours. As of writing, the pair was down 0.23% on the day at 103.55.

USD struggles to find demand

In the absence of significant macroeconomic data releases, risk perception remains the primary driver of financial markets. Wall Street’s main indexes opened at fresh all-time highs on Tuesday but failed to preserve the bullish momentum. The Dow Jones Industrial Average fell into the negative territory in the last hour and the S&P 500 turned flat on the day at 3,735.

Supported by risk-off flows, the JPY gathered strength as a safe-haven. In the meantime, the US Dollar Index stays deep in the negative territory near 90.00 despite the sour market mood and doesn’t allow USD/JPY to stage a rebound.

Nevertheless, light holiday trading is likely to force USD/JPY to fluctuate in a narrow band ahead of the New Year. On Wednesday, Pending Home Sales and Goods Trade Balance data will be featured in the US economic docket but are not expected to trigger a noticeable market reaction.

Technical levels to watch for