USD/JPY Forecast: Bulls await a sustained move beyond 107.70-75 hurdle

• USD/JPY struggled to capitalize on its Asian session uptick to the 107.70-75 supply zone.
• Concerns about rising COVID-19 cases benefitted the safe-haven JPY and capped gains.
• A modest pickup in the USD demand helped limit the downside, at least for the time being.

The USD/JPY pair lacked any firm directional bias on Wednesday and remained well within a familiar trading range held over the past one week or so. The early uptick during the Asian hours lacked any strong follow-through, rather met with some supply near the 107.70-75 region, or weekly tops set on Tuesday. Concerns about the ever-increasing coronavirus cases across the world continued taking its toll on the global risk sentiment. This, in turn, underpinned demand for the safe-haven Japanese yen and kept a lid on the pair's attempted positive move.

The JPY was further supported by the upbeat results from Japan's economy watchers survey. The outcome showed that confidence about current economic conditions logged a record rise and jumped to 38.8 in June from 15.5 previous. The outlook index, which indicates the level of confidence in future conditions, rose to 44.0 during the reported month as compared to May's 36.5 and 24.1 expected. The pair touched an intraday low level of 107.42, albeit the emergence of some fresh US dollar buying interest since the early European session help limit the slide.

Other second-tier Japanese data released this Wednesday showed May month trade deficit reduced to ¥-556.8 billion from ¥-966.5 billion previous. Adding to this, the Current Account surplus jumped to ¥1176.8 billion in May as compared to ¥1088.2 billion estimated. On the other hand, Bank Lending for June recorded a 6.2% YoY growth as against a rise to 7.2% expected from 4.8% previous.

The pair now seems to have stabilized just above mid-107.00s. In the absence of any major market-moving economic releases from the US, developments surrounding the coronavirus saga might continue to play a key role in influencing the JPY's safe-haven demand. This, coupled with the USD price dynamics might further contribute to produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, bulls might still wait for a sustained move beyond the 107.70-75 supply zone before positioning for any further near-term appreciating move. Above the mentioned barrier, the pair is likely to surpass the 108.00 mark and test monthly tops, around the 108.15 region. Bulls might then aim to challenge the very important 200-day SMA, around the 108.35 region, which if cleared will set the stage for an extension of the recent recovery move from multi-month lows. On the flip side, weekly lows, around the 107.25 region, now seems to act as immediate support and is closely followed by the 107.00 mark. Failure to defend the mentioned support levels might turn the pair vulnerable to resume its bearish trajectory and slide back towards the 106.00 round-figure mark.