USD/JPY edges higher toward mid-106s amid broad USD strength

The USD/JPY pair, which slumped to its lowest level since late 2016 last Monday, closed the week with a gain of more than 100 pips supported by recovering US Treasury bond yields amid easing concerns over a prolonged US-China trade conflict and a broadly stronger USD. With the markets starting the new week in a relatively calm manner, the pair inched higher and was last seen trading at 106.35, adding 0.05% on the day. 

Upbeat sentiment helps USD/JPY stay in green

Last week, both sides in the US-China trade war called for "calm negotiations" with an aim to resolve the trade differences without escalating the conflict any further. Although the Trump administration's tariff hike went into effect yesterday, the fact that the US bond and stock markets are closed due to the Labor Day holiday didn't allow a sharp shift in the market sentiment.

In fact, with the UK's FTSE 100 leading the way with a daily gain of more than 1%, major equity indexes in Europe are posting modest gains to reflect the risk-on environment. 

Additionally, the data from China during the Asian session showed that the business activity in the manufacturing sector expanded at a better pace than expected with the Caixin Manufacturing PMI coming in at 50.4 and beating the market expectation of 49.8.

On the other hand, the uncertainty surrounding Brexit talks and expectations over the introduction of an aggressive stimulus package by the European Central Bank later this month push investors away from major European currencies and help the Greenback continue to find demand. As of writing, the US Dollar Index is moving sideways above the 99 mark, staying near the 27-month high that it set at 99.10 earlier today. 

Technical levels to watch for