USD/JPY clings to gains above mid-103.00s, upside seems limited

• A modest pickup in the USD demand assisted USD/JPY to gain some traction on Friday.
• A pullback in the equity markets, sliding US bond yields might cap gains for the major.

The USD/JPY pair edged higher through the early European session and was last seen trading near the top end of its daily range, around the 103.65-70 region.

Following the previous day's consolidative price move near two-week lows, the pair regained traction on the last trading day of the week and was supported by a modest pickup in the US dollar demand. That said, a combination of factors might hold bulls from placing aggressive bets and cap gains for the USD/JPY pair.

A sharp pullback in the equity markets could lend some support to the Japanese yen's relative safe-haven status. Given that a lot of positive news was already priced in the markets, investors opted to take some profits off the table amid renewed concerns about the economic fallout from the ever-increasing COVID-19 cases.

Meanwhile, the global flight to safety was reinforced by a fresh leg down in the US Treasury bond yields. This might keep a lid on any meaningful upside for the greenback. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move for the USD/JPY pair.

Market participants now look forward to the release of the flash version of the US PMI prints for some short-term trading impetus. This, along with developments surrounding the coronavirus saga, will play a key role in influencing the safe-haven JPY and assist traders to grab some short-term opportunities around the USD/JPY pair.

Technical levels to watch