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  • On bids for the second consecutive session amid renewed trade optimism.
  • Recovering US bond yields underpinned the USD and remained supportive.

The USD/JPY pair traded with a mild positive bias through the Asian session on Tuesday and remained well within the striking distance of the overnight swing high.
 
Following a bearish gap opening at the start of a new trading week, the pair managed to regain positive traction and rallied around 80-pips from an intraday low level of 106.65. A goodish pickup in the US Treasury bond yields underpinned the US Dollar demand and turned out to be one of the key factors that triggered the initial leg of the uptick.

Trade optimism remain supportive

The momentum got an additional boost following some positive trade-related comments from White House economic adviser Larry Kudlow, saying that the United States was open to looking at China’s proposals and delisting of Chinese companies was not on the table. Kudlow further added that the US and Chinese trade negotiators could make progress.
 
The remarks helped ease anxiety led by earlier reports that Chinese officials were increasingly reluctant to agree to a broad trade deal pursued by the US President Donald Trump and dented the Japanese Yen’s (JPY) safe-haven status. The JPY was further weighed down by Tuesday’s softer cash earnings data from Japan.
 
The pair, however, lacked any strong bullish conviction as investors seemed reluctant to place any aggressive bets and might prefer to wait on the sidelines ahead of the highly-anticipated US-China trade negotiations in Washington, starting this Thursday.
 
In the meantime, Tuesday’s US economic docket, highlighting the release of Producer Price Index (PPI), will be looked upon for a fresh impetus. This coupled with the broader market risk sentiment and the USD price dynamics might further contribute towards producing some meaningful trading opportunities.

Technical levels to watch