USD/JPY trades with modest losses, flirts with session lows around mid-107.00s

The USD/JPY pair edged lower on the first day of a new trading week and was last seen trading near session lows, around mid-107.00s.

The pair failed to capitalize on Friday's goodish intraday recovery move of around 80 pips from two-week lows and continued with its struggle to make it through 50-day SMA. The USD/JPY pair once again started retreating from the vicinity of the 108.00 round-figure mark amid the continuous offered tone surrounding the US dollar, albeit the upbeat market mood helped limit any meaningful downfall.

The greenback remained depressed amid hopes of a sharp V-shaped recovery for the global economy and the recent optimism over a potential COVID-19 vaccine. This coupled with widespread riots in the US, following George Floyd's death at the hands of Minneapolis police, further pressured the buck and contributed to the USD/JPY pair's mildly weaker tone through the Asian session on Monday.

Meanwhile, the US President Donald Trump began the process of ending Hong Kong's special status but did not withdraw from the US-China phase-one trade deal. Adding to this, signs of recovery in the Chinese economy from the coronavirus pandemic remained supportive of the upbeat market mood. This, in turn, undermined the safe-haven Japanese yen and extended some support to the USD/JPY pair.

Looking at the broader picture, the pair has been oscillating in a narrow trading band between the 107.00-108.00 levels over the past two weeks or so. This makes it prudent to wait for a sustained break in either direction before traders start positioning for the pair's near-term trajectory.

Moving ahead, market participants now look forward to the US economic docket, highlighting the release of the ISM Manufacturing PMI. The data might influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

Technical levels to watch