USD/JPY sits near 2-week tops, around 105.70 region

The USD/JPY pair climbed to two-week week tops during the early European session, with bulls now looking to extend the momentum further beyond the 105.70 supply zone.

Following the previous day's good two-way price moves, the pair managed to regain positive traction on Tuesday and seemed rather unaffected by a softer tone surrounding the US dollar. The upbeat market mood – as depicted by a positive trading sentiment around the equity markets – undermined the safe-haven Japanese yen and was seen as a key factor driving the USD/JPY pair higher.

The global risk sentiment remained well supported by upbeat Chinese data released over the weekend, which offered signs of economic recovery in the world's second-largest economy. Adding to this, the latest optimism over additional US fiscal stimulus measures further boosted investors' appetite for perceived riskier assets and drove flows away from traditional safe-haven currencies.

Meanwhile, worries about the ever-increasing coronavirus pandemic and the US political uncertainty continued lending some support to the greenback's status as the global reserve currency. Hence, the key focus will remain on the first US presidential debate between President Donald Trump and Democrat candidate Joe Biden, due later this Tuesday at 01:00 GMT.

In the meantime, the broader market risk sentiment will continue to play a key role in influencing the USD/JPY pair. Later during the early North American session, the release of the Conference Board's US Consumer Confidence Index will also be looked upon for some short-term trading opportunities.

From a technical perspective, a sustained move beyond the 105.70-80 region has the potential to push the USD/JPY pair beyond the 106.00 mark. The pair might aim back to test the 106.25-30 supply zone before eventually climbing to 100-day SMA hurdle near the 106.60-65 region.

Technical levels to watch