USD/JPY struggles to gain any meaningful traction, holds steady near 139.00 mark

The USD/JPY pair edges higher during the Asian session on Wednesday, albeit lacks bullish conviction and currently trades around the 139.00 mark or the top end of a familiar range held over the past week or so.

The underlying bullish sentiment surrounding the global equity markets undermines the safe-haven Japanese Yen (JPY) and turns out to be a key factor lending some support to the USD/JPY pair. Adding to this, the overnight less hawkish remarks by Bank of Japan (BOJ) Governor Kazuo Ueda further weigh on the JPY and remain supportive of the pair's modest intraday uptick.

Speaking at a news conference after the G20 meeting in India, Ueda noted that there was still some distance to sustainably achieve the 2% inflation target. In response to a question on whether BoJ saw the need to tweak YCC at its meeting in July, Ueda said that unless our assumption on need to sustainably achieve 2% target changes, our narrative on monetary policy won't change.

The upside for the USD/JPY pair, however, remains limited in the wakeof subdued US Dollar (USD) price action, which, so far, has been struggling to register any meaningful traction from its lowest level since April 2022 touched on Tuesday. The markets have been pricing out the possibility of any further rate hikes by the Federal Reserve (Fed) after the expected 25 bps lift-off in July.

The expectations were reaffirmed by the US CPI report released last week, pointing to a further moderation in consumer inflation and should allow the US central bank to soften its hawkish stance. This has been a key factor behind the recent corrective decline in the US Treasury bond yields, which keeps the USD bulls on the defensive and might cap the upside for the USD/JPY pair.

The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the recent sharp pullback from the YTD peak - levels just above the 145.00 psychological mark - has run its course. Traders now look to the US housing market data - Building Permits and Housing Starts - for some impetus later during the North American session.

Technical levels to watch