USD/JPY struggles to find direction, stays flat below 106.00

• USD/JPY is fluctuating in a tight range on Monday.
• US Dollar Index looks to close second straight trading day in the positive territory.
• Wall Street's main indexes trade mixed at the start of the week.

The broad-based USD strength witnessed during the first half of the day helped the USD/JPY pair advance to its highest level in nearly a week at 106.21. Although the pair lost its traction and dropped to the 105.70 area in the early American session, it didn't have a difficult time erasing its losses and was last seen trading flat on the day at 105.90.

DXY looks to build on Friday's gains

The USD's market valuation on Monday remains as the primary driver of USD/JPY's movements. The US Dollar Index (DXY) posted decisive gains on Friday after the Nonfarm Payrolls in the US rose by 1.8 million in July to beat the market expectation of 1.6 million. In the absence of significant fundamental drivers, the DXY preserved its bullish momentum at the start of the week and rose to 93.70. 

Following a technical correction to 93.30, the DXY turned north and was last seen gaining 0.15% on a daily basis at 93.52. A modest recovery witnessed in the US Treasury bond yields and the mixed market action witnessed in Wall Street's main indexes seem to be helping the USD preserve its strength.

In the early Asian session on Tuesday, Current Account, Bank Lending and Trade Balance data will be featured in the Japanese economic docket. Nevertheless, USD/JPY is likely to continue to react to changes in the USD's performance against its peers.

Technical levels to watch for