USD/JPY clings to gains near session tops, just above 110.00 mark

The USD/JPY pair traded with a mild positive bias through the Asian session and was last seen hovering near daily tops, just above the key 110.00 psychological mark.

A combination of supporting factors assisted the USD/JPY pair to edge higher for the third consecutive session on Tuesday and inch back closer to the overnight swing highs. The underlying bullish sentiment – as depicted by a generally positive tone around the equity markets – weighed on the safe-haven Japanese yen and acted as a tailwind for the major. Bulls further took cues from a modest uptick in the US Treasury bond yields, bolstered by expectations for an imminent Fed taper announcement.

That said, a subdued US dollar price action kept a lid on any meaningful upside. The USD bulls now seem to have moved on the sidelines and await the release of the latest US consumer inflation figures, due later during the early North American session. The CPI report could provide fresh clues over the likely timing of the Fed's tapering plan. This, in turn, will influence the USD and provide some meaningful impetus to the USD/JPY pair ahead of the crucial FOMC meeting on September 20-21.

In the meantime, the US bond yields might play a key role in driving the USD demand. This, along with the broader market risk sentiment, could assist traders to grab some short-term opportunities around the USD/JPY pair. From a technical perspective, the recent sideways consolidate price moves witnessed over the past four weeks or so points to indecision among traders and warrants some caution before placing any aggressive directional bets. This makes it prudent to wait for some strong follow-through buying before positioning for any meaningful appreciating move heading into the key data risk.

Technical levels to watch