USD/JPY clings to modest gains near mid-108.00s, lacks follow-through
- USD/JPY gains some follow-through traction and recovers further from three-month lows.
- Fears of a further escalation of US-Iran tensions kept a lid on any strong positive move.
- Market participants now look forward to the US ISM PMI for some trading opportunities.
The USD/JPY pair traded with a mild positive bias on Tuesday, albeit lacked any strong follow-through and remained capped near mid-108.00s.
The pair gained some follow-through traction for the second consecutive session on Tuesday and added to the previous session's goodish intraday recovery move of around 60-70 pips from near three-month lows.
Geopolitical tensions likely to cap gains
A slight improvement in the global risk sentiment dented the Japanese yen's perceived safe-haven status and prompted some short-covering move. Bulls further took cues from a solid bounce in the US Treasury bond yields.
Meanwhile, a positive tone around the US bond yields extended some support to the US dollar and remained supportive. The uptick, however, lacked bullish conviction and remained capped amid fresh threats from Iran.
It is worth reporting that the Iranian ambassador to China said that Iran will retaliate against the US killing of Quds Force Commander. Adding to this, Iran’s Fars News Agency stated that Iran is assessing 13 retaliation 'scenarios' against the US.
Hence, it will be prudent to wait for some strong follow-through buying, possibly beyond the very important 200-day SMA barrier near the 108.65 region, before positioning for any further near-term appreciating move.
Moving ahead, Tuesday's US economic docket – highlighting the release of ISM Non-Manufacturing PMI – will now be looked upon for some short-term trading opportunities later during the early North-American session.
Technical levels to watch