USD/JPY trims gains, still trading with minor gains at 106.25

The USD/JPY pair is struggling to hold on to its early gains and is now on the verge of breaking into negative territory to currently trade around 106.20-25 region. 

Traders remained undecided over the pair's near-term direction ahead of this week's FOMC and BOJ monetary policy meetings on Wednesday and Friday, respectively. Moreover, a mixed performance of European equity markets has also kept risk appetite on the back foot and is restricting a risk-on rally for the USD/JPY major.

An empty economic docket from the US seems unlikely to provide fresh impetus while short-term traders are likely to take cues from the sentiment surrounding riskier assets - like equities and commodities, on the first trading day of the week that is overloaded with key event risks.

Technical outlook

Omkar Godbole, Editor and Analyst at FXStreet, notes, "We have a confluence of trend line and Fibo level at 106.45 – Falling trend line drawn from Jan 29 high and May 30 high + Falling trend line drawn from Mar 29 high and Apr 28 high + 106.64 (38.2% of 2011 low – 2015 high)."

"On the higher side, only a day end closing above 106.45 would open doors for a re-test of Thursday’s high of 107.49. A violation there appears likely in the wake of bullish daily RSI and thus could yield 108.15 (100-DMA)."

"On the other hand, pair’s retreat from Thursday’s high of 107.49 and a daily closing back inside falling channel followed by a rejection at 106.45 and a drop below monthly 200-MA of 105.90 would signal a fresh slide to 104.19 (23.6% of Jan 29 high – June 24 low)."