USD/JPY trades with modest gains around 108.30 area, upside remains capped

The USD/JPY pair maintained its bid tone through the early North American session, albeit seemed struggling to capitalize on the move beyond mid-108.00s.

The pair showed some resilience below the 108.00 mark and gained some positive traction on Tuesday to recover a part of the previous day's losses. An intraday uptick in the US Treasury bond yields triggered the initial leg of the positive move, which got an additional lift from a modest US dollar rebound from multi-week lows.

However, a turnaround in the global risk sentiment – as depicted by a weaker opening in the US equity markets – extended some support to the safe-haven Japanese yen. This, in turn, held bullish traders from placing any aggressive bets and kept a lid on any meaningful upside for the USD/JPY pair, at least for the time being.

Meanwhile, the USD/JPY pair's inability to capitalize on the recovery move suggests that the recent slide from the vicinity of the 111.00 mark, or one-year tops might still be far from being over. This makes it prudent to wait for some strong follow-through buying before confirming that the pair has formed a strong near-term base.

In the absence of any major market-moving economic data from the US, the broader market risk sentiment will drive demand for the safe-haven JPY and provide some impetus to the USD/JPY pair. Traders might further take cues from the US bond yields, which might influence the USD price dynamics and produce some short-term opportunities.

Technical levels to watch