USD/JPY clings to modest gains near session tops, around 107.00 mark

The USD/JPY pair was seen hovering near the top end of its daily trading range, with bulls looking to build on the intraday positive move beyond the 107.00 mark.

The pair stalled its retracement slide from near two-week tops – set on Monday – and once again managed to attract some buying near the 106.65-60 horizontal support. The uptick was supported by some intraday US dollar rebound, though lacked any strong follow-through and seems more likely to remain capped amid a combination of negative factors.

Worries that the second wave of the coronavirus infections could delay the US economic recovery, coupled with the impasse over the next round of US economic stimulus measures kept the USD bulls on the defensive. It is worth reporting that Republicans and Democrats have been struggling to reach consensus on a $3 trillion relief bill.

Adding to this, concerns over worsening US-China relations could benefit the safe-haven Japanese yen and further collaborate towards limiting the upside for the USD/JPY pair. Diplomatic tensions between the world's two largest economies escalated further after the United States abruptly ordered China to close its consulate in Houston.

US State Department spokeswoman Morgan Ortagus said the consulate was directed to close "to protect American intellectual property and Americans' private information." China was quick to respond and threatened to retaliate with firm countermeasures, sparking fears that the latest dispute could halt the US-China trade deal.

Hence, it will be prudent to wait for some strong follow-through buying positioning for any further near-term appreciating move. Conversely, a sustained breakthrough the 1065-60 support zone will confirm a near-term bearish break and set the stage for a slide back towards June monthly swing lows, around the 106.05 region.

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