EUR/JPY clings to modest daily gains near 120.30

• Upbeat ZEW data helps shared currency find demand on Tuesday.
• Investors remain cautious while waiting for fresh US-china trade headlines.
• ECB is expected to leave its policy rate unchanged this week.

The EUR/JPY pair fluctuated in a very narrow band on Monday but was able to post small gains on Tuesday supported by the upbeat ZEW data. As of writing, the pair, which touched a fresh session high of 120.35, was up 0.2% on the day at 120.30.

The closely-watched ZEW survey revealed that Economic Sentiment in Germany rose to 10.7 in December from -2.1 in November and improved to 11.2 in the eurozone in the same period to come in much higher than the market expectation of -17.7.

Eyes on ECB and US-China trade conflict

Although the shared currency gathered strength against its major rivals on these readings, major European equity indexes struggled to gain traction and Germany's DAX, the UK's FTSE and the broad Eurostoxx 50 were each erasing more than 1% at the time of press. The lack of positive developments surrounding the US-China trade talks seems to be forcing investors to stay away from risk-sensitive assets.

On Thursday, the European Central Bank's (ECB) monetary policy meeting will be looked upon for fresh impetus. Previewing the event, “the ECB meets on Thursday, which will be Lagarde's debut, and we do not expect any changes," said Danske Bank analysts. "We will look for comments on the ECB's monetary policy strategy review.”

Technical levels to watch for