USD/JPY trims a major part of BoJ-inspired gains, slides below mid-129.00s amid weaker USD

• USD/JPY retreats over 200 pips from a multi-day top touched in the aftermath of the BoJ decision.
• Bets for smaller Fed rate hikes, sliding US bond yields weigh heavily on the USD and exert pressure.
• Traders now look to the US PPI and monthly Retail Sales figures for some meaningful opportunities.

The USD/JPY pair trims a major part of the Bank of Japan (BoJ)-inspired gains to a multi-day peak and slides back below mid-129.00s during the first half of the European session.

The US Dollar comes under heavy selling pressure following a strong intraday rally and turns out to be a key factor attracting some sellers around the USD/JPY pair at higher levels. Firming expectations for a less aggressive policy tightening by the Fed trigger a fresh leg down in the US Treasury bond yields and weigh on the Greenback. In fact, the markets now seem convinced that the US central bank will soften its hawkish stance amid signs of easing inflationary pressure and have been pricing in a smaller 25 bps rate hike in February.

Despite the sharp intraday pullback of over 175 pips from the 131.55-131.60 area, the USD/JPY pair is still up nearly 1% for the day in the wake of the BoJ's dovish policy decision. The Japanese central bank maintained ultra-low interest rates and left its yield curve control measures unchanged, defying expectations for more hawkish signals. The announcement triggers a steep fall in the Japanese bond yields, recording the biggest drop since September 2003. This, in turn, might continue to weigh on the JPY and lend support to the USD/JPY pair.

Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) and monthly Retail Sales figures later during the early North American session. Apart from this, speeches by a slew of FOMC members and the US bond yields might influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment, which tends to drive demand for the safe-haven JPY. This, in turn, should provide some impetus to the USD/JPY pair and allow traders to grab short-term opportunities.

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