USD/JPY retreats from session highs, turns flat near 107.30

• USD/JPY is struggling to make a decisive move on Tuesday.
• Mixed market sentiment doesn't provide any directional clues to USD/JPY.
• US Dollar Index drops below 96.30 as Wall Street rebounds.

The USD/JPY pair edged higher toward 107.50 in the early trading hours of the American session but failed to preserve its bullish momentum. As of writing, the pair was virtually unchanged on the day at 107.27.

The S&P 500 opened the day deep in the negative territory on Tuesday and helped the greenback gather strength against its rivals. Although the US Dollar Index (DXY) recovered to 96.50 area, a positive shift in market sentiment caused the USD to lose interest. At the moment, the S&P 500 and the Dow Jones Industrial Average are up 0.25% and 0.85%, respectively, while the DXY is down 0.3% on the day at 96.25.

Focus shifts to BOJ

Earlier in the day, the US Bureau of Labor Statistics reported that annual inflation, as measured by the core Consumer Price Index (CPI), stayed unchanged at 1.2% in June and was largely ignored by the market participants.

On Wednesday, the Bank of Japan (BoJ) will announce its rate decision and release the monetary policy statement. Previewing this event, "we think this will be the status quo for the foreseeable future," said TD Securities analysts. "This meeting will be accompanied by a downgraded growth estimate in its Outlook Report. This should surprise no one however. We see little implication for the JPY.”

Technical levels to watch for