USD/JPY clings to gains near session tops, remains below 110.00 mark

The USD/JPY pair traded with a mild positive bias heading into the European session, albeit lacked any follow-through and remained below the key 110.00 psychological mark.

The pair edged higher on Wednesday and is now looking to build on the overnight modest bounce from one-week lows, or the 100-day SMA support near the 109.60-55 region. A modest uptick in the US Treasury bond yields extended some support to the US dollar. This, in turn, was seen as a key factor that provided a modest lift to the USD/JPY pair.

That said, the shaky risk sentiment acted as a tailwind for the safe-haven Japanese yen and capped the upside for the USD/JPY pair. Investors remain worried about the potential economic fallout from the fast-spreading Delta variant of the coronavirus. This, along with China's regulatory crackdown, sent ripples through the global equity markets.

Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the conclusion of a two-day FOMC monetary policy meeting. The Fed is scheduled to announce its decision later during the US session and market participants will look for a clear answer about the crucial question of when the tapering will begin.

Nevertheless, the outcome will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/JPY pair. Heading into the key event risk, the broader market risk sentiment, along with the US bond yields will be looked upon for some short-term trading opportunities amid absent market-moving economic releases.

Technical levels to watch