USD/JPY clings to modest gains near 107.70 region, fresh session tops

The greenback edged higher against its Japanese counterpart, lifting the USD/JPY pair back closer to session tops during the early European session on Tuesday.
 
The pair extended its recent pullback from multi-week tops and dropped to near two-week lows on Monday. Against the backdrop of the recent escalation of geopolitical tensions in the Middle East, renewed worries about the global economic growth - further fueled by a raft of weaker Euro-zone manufacturing PMI prints on Monday - boosted demand for traditional safe-haven currencies, including the Japanese Yen, and exerted some downward pressure on the major.

Combination of factors remain supportive

However, a strong pickup in the US Dollar demand, primarily led by some renewed selling pressure surrounding the shared currency, helped limit deeper losses, rather assisted the pair to find some support near the 107.30 region. The USD held on to its overnight gains and was further supported by a modest recovery in the US Treasury bond yields, which assisted the pair built on the overnight bounce amid signs of stability in equity markets.
 
The Japanese Yen was further weighed down by the fact the US-Japan trade talks ended without any solution to the US President Donald Trump's proposed tariffs on the $50 billion in cars and parts shipped by Japan to the US annually. As investors looked for signs of progress from the US-China trade negotiations, uncertainties surrounding global trade issues might turn out to be the only factor that might keep a lid on any runaway rally for the major.
 
Hence, it will be prudent to wait for a strong follow-through buying interest before traders start positioning for any further near-term appreciating move. Later during the early North-American session, the US economic docket - highlighting the release of Conference Board's Consumer Confidence Index - might be looked upon for some short-term trading opportunities.

Technical levels to watch