USD/JPY recovers further from 7-week lows, moves beyond mid-106.00s

The USD/JPY pair traded with a mild positive bias through the early European session and was last seen trading near daily tops, just above mid-106.00s.

The pair managed to regain some positive traction on Tuesday and built on the previous day's late rebound from the vicinity of the 106.00 round-figure mark, or seven-week lows. The uptick was supported by a modest pickup in the US dollar demand, though lacked any strong bullish conviction.

Following the slump witnessed over the past two trading sessions, the greenback staged a modest recovery on Tuesday and was seen as one of the key factors lending some support to the USD/JPY pair. Bulls further took cues from some follow-through move up in the US Treasury bond yields.

This comes on the back of the latest optimism over a sharp V-shaped global economic recovery, which partly offset worries about a resurgent in new coronavirus cases and remained supportive. However, a cautious mood around the equity markets kept a lid on any strong gains for the USD/JPY pair.

In the absence of any major market-moving economic releases on Wednesday, the pair remains at the mercy of the USD price dynamics and the broader risk sentiment. This makes it prudent to wait for some strong follow-through strength before confirming that the USD/JPY pair might have bottomed out.

Technical levels to watch