USD/JPY sits near session tops, just below mid-108.00s

The USD/JPY pair is currently placed near the top end of its daily trading range, with bulls still awaiting a sustained move beyond mid-108.00s.

The pair came under some intense selling pressure during the early Asian session on Wednesday and tumbled to fresh three-month lows in reaction to the latest escalation of geopolitical tensions in the Middle East.

Bulls still seemed reluctant below 200-DMA

Iran – in retaliation to the US drone strike last week – fired more than a dozen ballistic missiles on US-led forces in Iraq. The move triggered a fresh wave of the global risk-aversion trade and boosted the JPY's safe-haven status.

The downward momentum took along some short-term trading stops being placed near the 108.00 handle and dragged the pair to its lowest level since October 10, albeit bulls continued to show some resilience at lower levels.

However, the fact that the US President Donald Trump refrained from any aggressive response to the strikes, coupled with comments by Iranian Foreign Minister Javad Zarif, saying that Iran does not seek an escalation of the war, helped ease concerns.

As the markets turned calm, a slight improvement in the global risk sentiment prompted some intraday short-covering, which eventually turned out to be one of the key factors behind the pair's goodish bounce of around 75-80 pips.

Despite the recovery, the pair remained well below the very important 200-day SMA, making it prudent to wait for some strong follow-through buying before positioning for any further near-term recovery towards the 109.00 handle.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of the ADP report on private-sector employment, which might influence the USD price dynamics and provide a fresh impetus.

Technical levels to watch