Categories: Markets

USD / JPY struggles to find direction, trapped within a range around the 104.00 level

  • A combination of divergent factors fails to provide a significant boost to USD / JPY.
  • The upbeat Japanese GDP report and softer risk appetite sentiment benefits the safe haven JPY and limits the pair’s gains.
  • A rally in US bond yields extends some support for the USD and helps limit the pair’s slide.

The pair USD/JPY lacks a firm directional bias and remains trapped within a narrow range, around the 104.00 level, at the start of the European session on Tuesday.

Mixed performance in equity markets has extended some support to the Japanese yen haven, which has been supported by a better-than-expected third-quarter Japanese GDP report. In fact, Japan’s economy expanded 5.3% quarter-on-quarter versus 5.0% originally estimated and the annualized growth rate stood at 22.9% versus 21.5% anticipated. This, in turn, has been seen as one of the key factors that has limited any significant upward movement for the USD / JPY pair.

The negative factor, to some extent, has been offset by a modest rally in U.S. Treasury yields, which has offered some support to the U.S. dollar. Aside from this, concerns about the continued rise in new coronavirus cases have further benefited the USD as a global reserve currency and helped limit the decline in the USD / JPY pair, ultimately leading to moderate price action. and limited within a range during the first half of trading action on Tuesday.

However, USD bulls seem reluctant to open new positions amid the expectations that US lawmakers will accept an emergency stimulus plan for COVID-19. This has also been seen as a key factor keeping USD / JPY within the trading range of the previous day. This makes it prudent to wait for a sustained move in either direction before positioning for any significant intraday movement amid the absence of relevant economic releases.

USD / JPY technical levels