• USD/JPY seesaws between tepid gains/minor losses through the European session on Wednesday.
• A positive risk tone, and the BoJ’s dovish stance, undermine the JPY and lend support to the pair.
• Retreating US bond yields keeps the USD bulls on the defensive and continues to act as a headwind.
• Traders now look to the US PPI and the FOMC meeting minutes for some meaningful opportunities.

The USD/JPY pair struggles to capitalize on the intraday move up of over 50 pips from levels just below mid-148.00s and trade in neutral territory during the first half of the European session on Wednesday. Spot prices remain below the 149.00 mark and well within a familiar trading band held over the past week or so as traders keenly await cues about the Federal Reserve's (Fed) future rate hike path.

Hence, the focus will remain glued to Wednesday's release of the US Producer Price Index (PPI) and the FOMC minutes, due later during the early North American session. This will be followed by the latest US consumer inflation figures on Thursday, which will play a key role in influencing the near-term US Dollar (USD) price dynamics and help determine the next leg of a directional move for the USD/JPY pair.

In the meantime, a generally positive tone around the equity markets, along with the Bank of Japan's (BoJ) persistent ultra-easy monetary policy, is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the USD/JPY pair. That said, diminishing odds for further interest rate hikes by the Fed keep the USD bulls on the defensive and hold back bulls from placing aggressive bets around the major.

The recent dovish remarks by several Fed officials have been fueling speculations that the US central bank is nearing the end of the rate-hiking cycle. This has been a key factor behind a further decline in the US treasury bond yields, which removes some of the driving force behind a stronger Greenback. Heading into the key data risk, the aforementioned fundamental backdrop might continue to cap gains for the USD/JPY pair.

Any meaningful downside, however, still seems elusive as the markets are still pricing in a small possibility of at least one more Fed rate hike move by the end of this year. Furthermore, concerns that the expansion of the Israel-Gaza conflict to the wider Middle East would push Oil prices higher and complicate the effort to reduce inflation, which, in turn, might force the US central bank to keep rates higher for longer.

Even from a technical perspective, the range-bound price action points to indecision among traders over the near-term trajectory for the USD/JPY pair. This further makes it prudent to wait for a sustained breakout through a one-week-old trading range before placing fresh directional bets.

Technical levels to watch