USDJPY remains stuck in a limited range for over a month already. The pair has settled between the 107.00 and 108.00 figures, struggling for direction, with the horizontal channel tightening these days. The dollar shrugs off the latest drivers, and traders don’t dare to push the pair in either direction. The key moving averages continue to act as resistance and support levels, and as long as the prices remain between them, the impetus is considered directionless.
Yesterday, USDJPY climbed marginally, but the bulls were stopped by the 108.00 barrier despite a fairly positive risk sentiment as investors continued to price in a more robust economic recovery from the coronavirus pandemic as the incoming economic data start to point to some improvements in business activity. Still, market participants are aware of the persisting risks and thus keep a cautious tone in general, which caps the selling pressure surrounding the safe-haven Japanese yen.
As the pair stays within a tight range, the possibility of a breakthrough is rising. The dollar just needs a meaningful catalyst to move decisively in either direction. If the US-China trade tensions come back in market focus, and fresh economic updates suggest the economic recovery has a long way to go, a fill-fledged risk aversion can reemerge and drive the yen higher. In this scenario, USDJPY may challenge the 107.30 and then dive under the 107.00 handle. marginally above this level, the 20-daily moving average arrives. A decisive break below this level will mark a breakdown and could send the greenback to the 107.50 area for the first time since May 11.
On the upside, a continued rally in risky assets may encourage dollar bulls and send the prices above 108.00. however, the key upside hurdle comes around 108.30, where the 100- and 200-daily moving averages converge. So far, the dynamics remains neutral, as well as the bias in the daily RSI. On the four-hour charts, the pair is supported by the 20-SMA around 107.70.
