USD/JPY clings to modest gains, struggles to find acceptance above 107.00 mark

The USD/JPY pair struggled to capitalize on the Asian session uptick and was now seen consolidating in a narrow trading band, above mid-106.00s.

The pair managed to regain some positive traction on Tuesday and built on the overnight late bounce from the vicinity of the key 105.00 psychological mark amid a combination of supporting factors.

Coronavirus jitters seemed to cap gains

A modest recovery in the global risk sentiment, as depicted by a positive mood in the equity markets, undermined the Japanese yen's safe-haven demand and extended some support to the major.

A coordinated effort by major central banks to offset any negative impact from the coronavirus pandemic helped boost investors’ confidence and led to a goodish bounce in the equity markets.

The risk-on flow was further reinforced by a goodish bounce in the US Treasury bond yields, which helped revived the US dollar demand and further contributed to the pair’s modest uptick.

Despite the supporting factors, the pair struggled to capitalize on its early move to levels beyond the 107.00 round-figure mark and retreated around 60-70 pips from daily swing highs.

Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move amid persistent worries over the coronavirus outbreak.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of monthly retail sales figure in order to grab some short-term trading opportunities.

Technical levels to watch