• 10-year US Treasury bond yield posts small daily gains.
• US Dollar Index stays below 98.50 ahead of US data.
• Coming up: Weekly jobless claims and Markit Manufacturing and Service PMI data from US.

Supported by the strengthening USD after the FOMC minutes, the USD/JPY pair closed 30 pips higher on Wednesday but struggled to preserve its bullish momentum today. As of writing, the pair was trading at 106.37, losing 0.23% on a daily basis. Despite this fall, however, the pair is struggling to set its next short-term direction as it continues to fluctuate in its tight 50-pip weekly range. 

Pair's action remains subdued

Earlier today, China's Commerce Ministry in a statement said that they hope the US will stop "wrong tariff action" and find a solution to the trade dispute through dialogue. The ministry further reiterated that the will have to retaliate if the US continues to persist in the current course.

Nevertheless, the impact of these comments from China on the market's risk perception was limited and failed to provide a directional clue to the pair. Meanwhile, the 10-year US treasury bond yield is up only 0.5% on the day, confirming the neutral market sentiment.

In the second half of the day, the IHS Markit will publish its US flash Manufacturing and Services PMI reports. Markets expect both readings to come in above the 50 mark to show an expansion in the business activity at a soft pace. If the PMI figures beat expectations, we could see markets lose hope of a 50 basis points Fed rate cut in September, which would cause the Greenback to gather strength against its major rivals.

Technical levels to watch for