• USD/JPY retreats from a two-week high, though lacks follow-through selling.
• The USD pares intraday gains on softer inflation data and acts as a headwind.
• The risk-on environment undermines the safe-haven JPY and to lends support.

The USD/JPY pair surrenders a major part of its intraday gains to a two-week high and retreats below the 133.00 round-figure mark during the early North American session on Friday.

The modest intraday US Dollar (USD) uptick loses steam after the US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index decelerated to a 5% YoY rate in February from 5.3% previous. Adding to this, the Core PCE Price Index - the Fed's preferred inflation gauge - unexpectedly edged lower to a 4.6% YoY rate from 4.7% in January. The data adds to the uncertainty about the Fed's rate-hike path, which acts as a headwind for the Greenback and prompts some intraday selling around the USD/JPY pair.

Bearish traders further took cues from a modest pullback in the US Treasury bond yields, which results in the narrowing of the US-Japan rate differential and benefits the Japanese Yen (JPY). That said, the underlying bullish tone around the global equity markets - amid easing fears of a full-blown banking crisis - continues to undermine the safe-haven JPY and remains supportive of a mildly positive tone around the USD/JPY pair. This, in turn, warrants caution for bearish traders and before positioning for any meaningful corrective pullback.

Friday's US economic docket also features the release of the Chicago PMI and revised Michigan Consumer Sentiment Index, though might do little to provide any meaningful impetus. Nevertheless, the USD/JPY pair still seems poised to register weekly gains for the first time in the previous five and remains at the mercy of the USD price dynamics heading into the weekend.

Technical levels to watch