USD/JPY in search of a firm direction, stuck in a narrow trading band

After an initial drop to 112.00 handle, the USD/JPY pair managed to recover the lost ground but failed to clear supply zone near 112.50-55 region.

The pair subsequently retreated from session high and has been oscillating in a narrow trading band around 112.30-20 region. The pair struggled to build on to its early up-move as market participants seemed unimpressed by BoJ's offer to buy ¥450 billion of debt maturing in 5-10 years, which failed to bring down JGB yields. 

Meanwhile, a mildly positive sentiment around riskier assets - like equities, and a fresh wave of up-move in the US Treasury bond yields has been able to keep the pair afloat above session lows, albeit has failed to trigger any risk-on trade and prompt investors for selling Yen.

Moreover, investors preferred to stay on the sideline ahead of this week's meeting between Japanese Prime Minister Shinzo Abe and the US President Donald Trump.

On Wednesday, the pair would continue to tract the broader US Dollar price-dynamics, with one eye on yields, amid thin economic docket.

Technical levels to watch

On a sustained break through 112.50-55 immediate resistance area, the pair seems to dart towards 112.70-75 barrier before eventually aiming towards reclaiming 113.00 handle and extend the up-move towards 113.20-25 resistance area. 

On the flip side, weakness below 112.00 round figure mark might continue to find support at multi-month lows near 111.60 region below which the pair could turn vulnerable to head towards testing 111.00 round figure mark, with some intermediate support near 111.35 level (Nov. 28 low).