USD/JPY eases from tops, still holding with modest gains above mid-105.00s

   •  Easing trade-war fears prompt risk-on trade and weigh on JPY’s safe-haven demand.
   •  Subdued USD demand fails to provide an additional boost and keeps a lid on the up-move.

The USD/JPY pair built on overnight recovery move from 16-month lows and has held in positive territory for the second consecutive day. 

Receding fears of a full-blown US-China trade war revived investors' appetite for riskier assets and is being reinforced by the prevalent positive sentiment around equity markets, which was eventually seen weighing on the Japanese Yen's safe-haven appeal. 

Apart from fading safe-haven demand, the Japanese Yen was further weighed down by the recent scandal surrounding Japanese Prime Minister Shinzo Abe and remained supportive of the pair's up-move to an intraday high level of 105.75. 

However, subdued US Dollar demand failed to provide an additional boost and kept a lid on any further up-move, with the pair quickly retreating around 15-20 pips from tops. 

With the broader market risk sentiment turning out to be a key determinant of the pair's momentum on Tuesday, today's release of CB's US Consumer Confidence Index would influence the USD price dynamics and also provide some fresh trading impetus.

Technical outlook

"The corrective rally could be extended to 106.20 in the next 24-48 hours, but further gains will likely be short-lived. The broader outlook remains bearish and as per the weekly chart, the pair looks set to test 101.19 - starting point of the Trump rally in the next few months," writes Omkar Godbole, Analyst and Editor at FXStreet.