USD/JPY in search of a firm direction, stuck in a range below mid-108.00s

• The prevalent risk-on mood weighed on the JPY’s safe-haven status and extended support.
• A sharp fall in the US bond yields undermined the USD and failed to impress bullish traders.

The USD/JPY pair extended its sideways consolidative price action on Tuesday and remained confined in a narrow trading band, just below mid-108.00s.
 
A combination of diverging factors failed to assist the pair to build on the previous session's intraday bounce from the 108.00 neighbourhood and led to a subdued/range-bound movement through the early European session.

Weaker US bond yields offset the risk-on mood

Against the backdrop of a partial trade deal between the US and China, the prevalent risk-on mood was seen driving flows away from traditional safe-haven assets – including the Japanese Yen – and extended some support to the major.
 
However, a subdued US Dollar demand – weighed down by a sharp downfall in the US Treasury bond yields – did little to impress bullish traders and seemed to be the only factor keeping a lid on any attempted positive move by the major.
 
Hence, it will be prudent to wait for a strong follow-through buying before traders start positioning for any further near-term appreciating move amid relatively thin US economic docket, featuring the release of Empire State Manufacturing Index.

Technical levels to watch