USD/JPY struggles to rebound above 107.00 despite risk-on mood

• USD/JPY continues to fluctuate below 107.00 on Friday.
• US Dollar Index recovers to 97.50 area after dropping to 97.16.
• Wall Street's main indexes pull away from session highs, remain in green.

The USD/JPY pair is trading sideways in a 25-pip range below 107 on Friday as the risk-on environment doesn't allow the JPY to capitalize on the USD weakness. As of writing, the pair was down 0.08% on the day at 106.87.

During the first half of the day, the upbeat performance of major European equity indexes showed that the market mood turned upbeat in the absence of significant fundamental drivers. Moreover, Wall Street's three main indexes opened the day sharply higher to make it difficult for the JPY to find demand as a safe-haven.

However, the 10-year US Treasury bond yield retraced its daily rally in the last hour and the S&P 500 pulled away from session highs, suggesting that risk flows are softening during the American session.

DXY returns to mid-97s

Meanwhile, the US Dollar Index (DXY), which closed the last three days in the positive territory, dropped to 97.16 earlier in the day before erasing its losses. At the moment, the DXY is flat on the day near 97.50, keeping USD/JPY's downside limited.

Earlier in the day, the data published by the US Bureau of Economic Analysis showed that the US' current account deficit narrowed to $104.2 billion in the first quarter. Later in the session, Jerome Powell, Chairman of the Federal Reserve, will be delivering a speech at 1700 GMT.

Technical levels to watch for