USD/JPY remains on the defensive, downside seems limited ahead of US CPI

The USD/JPY pair retreated over 20 from weekly tops and refreshed daily lows during the early European session, albeit quickly recovered few pips thereafter. The pair was last seen trading around the 109.55 region, down only 0.05% for the day.

The pair struggled to capitalize on the previous day's goodish rebound from the vicinity of the 50-day SMA support near the 109.20 region, instead met with some fresh supply on Wednesday. However, a combination of factors held traders from placing any aggressive bearish bets around the USD/JPY pair and helped limit the downside.

The US dollar gained some follow-through traction amid some repositioning trade ahead of the US consumer inflation figures, due later during the early North American session. Apart from this, a modest pickup in the US Treasury bond yields further underpinned the greenback and extended some support to the USD/JPY pair.

The market focus will remain glued to the US CPI report, which will be an important macro data that would set the tone for the upcoming FOMC meeting on June 15-16. This, in turn, will play a key role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the USD/JPY pair.

Heading into the key data risk, investors might prefer to remain on the sidelines. This might lead to a subdued/range-bound price action amid the prevalent cautious mood.

Technical levels to watch