USD/JPY climbs to fresh daily highs above 107.80 supported by risk-on flows

• USD/JPY gains traction after staying in a consolidation channel near 107.50.
• Major European equity indexes rise sharply on Tuesday.
• Broad-based USD weakness limits USD/JPY's upside ahead of American session.

The USD/JPY pair fluctuated in a very tight range near 107.50 during the Asian trading hours but started to climb higher on strengthening risk appetite in the last hours. As of writing, the pair was trading at fresh daily highs at 107.83, gaining 0.28% on a daily basis.

Risk rally weighs on JPY

Although major equity indexes in Asia closed the day higher on Wednesday, USD/JPY stayed relatively quiet as the broad-based selling pressure surrounding the greenback didn't allow the pair to gain traction. However, the sharp upsurge witnessed in European stocks put additional weight on the JPY's shoulders during the European session.

As of writing, both the Euro Stoxx 50 and Germany's DAX 30 indexes are rising around 2% on the day, making it difficult for the safe-haven JPY to show resilience against its peers.

On the other hand, the greenback is struggling to attract investors in the risk-on market environment and limiting USD/JPY's upside for the time being.

In the second half of the day, the Richmond Fed's Manufacturing Index will be featured in the US economic docket. More importantly, participants will keep a close eye on the Federal Reserve's Beige Book for fresh clues regarding the beginning of the economic recovery. Ahead of these releases, the US Dollar Index is down 0.18% on the day at 98.84.

Technical levels to watch for

USD/JPY