USD/JPY up little, lacks follow-through beyond mid-107.00s

• The prevalent risk-on mood helped USD/JPY to gain some positive traction on Tuesday.
• The market mood remains supported by the latest optimism over coronavirus vaccine.
• Sustained USD selling bias seemed to cap the upside amid worsening US-China relations.

The USD/JPY pair traded with a mild positive bias for the second straight session on Tuesday and climbed to one-week tops. The uptick, however, lacked any strong follow-through, with bulls struggling to build on the momentum further beyond mid-107.00s.

The latest optimism over encouraging data on coronavirus vaccine trial fueled some follow-through positive move in the global equity markets. The risk-on mood undermined demand for the safe-haven Japanese yen and was seen as one of the key factor extending some support to the major.

Meanwhile, the US dollar witnessed some follow-through selling on Tuesday and retreated further from three-week tops set last Friday. This, in turn, held investors from placing any aggressive bullish bets and eventually kept a lid on any further positive move for the USD/JPY pair.

Bulls also seemed reluctant amid growing fears about the second wave of coronavirus infections and worsening US-China relations. Hence, it will be prudent to wait for some strong follow-through buying before traders start positioning for any further near-term appreciating move.

Later during the early North American session, the US housing market data – Building Permits and Housing Starts – will be looked upon for some impetus. This coupled with the Fed Chair Jerome Powell and the US Treasury Secretary Steven Mnuchin’s joint congressional testimony might produce some meaningful trading opportunities.

Technical levels to watch