USD/JPY in search of a firm direction, consolidates below 108.00 handle

The USD/JPY pair now seems to have entered a bullish consolidation phase and was seen oscillating in a narrow trading band, just below the 108.00 handle.
 
Hopes of progress in the US-China trade talks kept the safe-haven Japanese yen on the defensive on the last trading day. The pair did get a minor lift during the early Asian session in reaction to the US President Donald Trump's positive trade-related comments, albeit lacked any strong follow-through.

Trade optimism remains supportive

President Trump, while speaking at a campaign rally in Minneapolis, said that trade talks with China are going well and that a deal could be reached. However, the prevalent US Dollar selling bias seemed to be the only factor holding investors from placing fresh bullish bets and capped any further gains.
 
Thursday’s softer US CPI figures reinforced market expectations that the Fed will cut interest rates further at its upcoming monetary policy meeting on October 29-30 and kept exerting some downward pressure on the Greenback, which eventually led to the pair's subdued/range-bound price action.
 
This coupled with a modest intraday pullback in the US Treasury bond yields might further collaborate towards keeping a lid on the pair's attempted bullish move, though a more bullish mood across global financial markets should help limit any deeper losses, at least for the time being.
 
Moving ahead, market participants now look forward to the US economic docket – featuring the release of Prelim UoM consumer sentiment index – for some short-term trading opportunities. Meanwhile, the focus will remain on the incoming trade-related headlines, which might continue to act as a key driver of the pair's momentum.

Technical levels to watch