USD/JPY struggles for a firm intraday direction, flat-lines around mid-132.00s

The USD/JPY pair struggles to capitalize on the previous day's late rebound from the 132.00 round-figure mark and remains on the defensive through the early European session on Friday. The pair currently trades around mid-132.00s, nearly unchanged for the day, and seems vulnerable amid the prevalent selling bias around the US Dollar (USD).

In fact, the USD Index, which tracks the Greenback against a basket of currencies, drops to a one-year high on the last day of the week amid firming expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle. The bets were lifted by the US Producer Price Index (PPI) released on Thursday, which showed that inflation at the wholesale level cooled dramatically in March. This comes on the back of the softer US CPI report on Wednesday, which suggested that disinflation is progressing smoothly, which should allow the US central bank to pause its policy tightening.

Furthermore, the March FOMC meeting minutes on Wednesday showed that several policymakers considered pausing interest rate increases after the failure of two regional banks. This keeps the US Treasury bond yields depressed, which continues to weigh on the Greenback. Apart from this, looming recession risks benefit the Japanese Yen's (JPY) relative safe-haven status and further contribute to capping the upside for the USD/JPY pair. That said, the Bank of Japan's (BoJ) dovish near-term outlook is holding back bearish traders from placing fresh bets and lending support to the major.

Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of this week's retracement slide from the 134.00 round-figure mark, or a nearly one-month high touched on Wednesday. Market participants now look to the US economic docket, featuring the release of monthly Retail Sales figures and the Preliminary Michigan Consumer Sentiment Index later during the early North American session. This, along with the broader risk sentiment, might provide some impetus to the USD/JPY pair and allow traders to grab short-term opportunities.

Technical levels to watch