USD/JPY trades flat on the day above 106.00 amid thin trading conditions

• USD/JPY is trading in a 25-pip range on Monday.
• Markets remain quiet amid Labor Day holiday in the US.
• US Dollar Index stays in the positive territory above 93.00.

The USD/JPY pair is having a difficult time making a decisive move in either direction on Monday as trading conditions remain thin due to the Labor Day holiday in the US. As of writing, the pair was unchanged on the day at 106.23.

USD/JPY closed the previous week in the positive territory as the greenback gathered strength against its rivals on the back of upbeat macroeconomic data releases. However, the sharp drop witnessed in major equity indexes in the US helped the JPY find demand as a safe-haven and limited the pair's upside.

After closing the previous five weeks in the positive territory and gaining nearly 10% during that rally, the S&P 500 Index snapped its winning streak and lost 2.3% last week. 

Focus shifts to Japanese GDP report

Although major European stocks are registering impressive gains on Monday, the risk-on market environment doesn't seem to be having a significant impact on the foreign exchange market. Meanwhile, the US Dollar Index is posting small daily gains at 93.05.

In the early trading hours of the Asian session on Tuesday, second-quarter Gross Domestic Product (GDP) and Trade Balance data will be featured in the Japanese economic docket. Markets expect the Japanese economy to contract by 8.1% on a quarterly basis. A better-than-expected reading could Asian stock markets gain traction and hurt the JPY. Nevertheless, this data is unlikely to force USD/JPY out of its recent trading range of 106-106.50.

Technical levels to watch for