USD/JPY clings to gains near 50-day SMA, bulls await a move beyond 108.00 mark

• USD/JPY regains some positive traction on Monday amid a positive mood around equity markets.
• Concerns about worsening US-China tensions seemed to be the only factor capping further gains.
• Sustained move beyond 50-day SMA, 108.00 mark needed to confirm any near-term bullish bias.

The USD/JPY pair edged higher on Monday and was last seen trading near the top end of its daily trading range, around the 107.70-75 region.

The pair managed to regain some positive traction on the first day of a new trading week and built on the previous session's intraday bounce of around 30 pips. The uptick seemed rather unaffected by concerns over worsening US-China relations, rather took cues from a positive mood around the equity markets.

It is worth recalling that diplomatic tensions between the world's two largest economies escalated further after reports last week indicated that China is planning to impose national security laws in Hong Kong. The US President Donald Trump was quick to respond and threatened a strong reaction if the law is passed.

This comes on the back of the recent development, where in the US Senate passed a bill that could block some Chinese companies from selling shares on the American stock exchanges. This, in turn, fueled worries about a major US-China tussle, albeit did little to revive demand for the safe-haven Japanese yen.

On the other hand, the US dollar held steady with modest gains and was seen as one of the key factors behind a mildly positive tone surrounding the USD/JPY pair. Investors, however, seemed reluctant to place any aggressive bets amid relatively thin liquidity conditions in the wake of Memorial Day holiday in the US.

Even from a technical perspective, the USD/JPY pair has been oscillating in a narrow trading band over the past one week or so. Hence, it will be prudent to wait for some strong follow-through buying beyond 50-day SMA barrier, just ahead of the 108.00 mark, before positioning for any further near-term appreciating move.

Technical levels to watch

USD/JPY