USDJPY rallies back closer to to mid-146.00s amid a strong pickup in USD demand

• USDJPY rebounds from a nearly two-week low touched earlier this Wednesday.
• Elevated US bond yields help revive the USD demand and remain supportive.
• The Fed-BoJ divergence also acts as a tailwind ahead of the US CPI on Thursday.

The USDJPY pair attracts some buying near the 145.15 region and stages a goodish recovery from a nearly two-week low touched earlier this Wednesday. The intraday uptick picks up pace during the early North American session and lifts spot prices to a fresh daily high, closer to mid-146.00s amid resurgent US Dollar demand.

Despite diminishing odds for a more aggressive policy tightening by the Federal Reserve, the markets are still betting on at least a 50 bps rate hike in December. This remains supportive of elevated US Treasury bond yields and assists the USD Index, which measures the greenback's performance against a basket of currencies, away from a multi-week low set on Tuesday.

The Japanese yen, on the other hand, continues to be weighed down by that the fact that the Bank of Japan, so far, has shown no intentions to raise interest rates. Moreover, the BoJ remains committed to guiding the 10-year bond yield at 0%, widening the US-Japan rate differential. This, in turn, supports prospects for a further appreciating move for the USDJPY pair.

That said, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency might keep a lid on any meaningful upside for spot prices. Apart from this, a softer risk tone could offer additional support to the safe-haven JPY and contribute to capping gains for the USDJPY pair, at least for the time being.

Traders also seem reluctant and might prefer to wait for a fresh catalyst from the latest US consumer inflation figures, due for release on Thursday. The crucial US CPI report will play a key role in determining the Fed's rate-hiking cycles, which, in turn, should determine the near-term trajectory for the greenback and the USDJPY pair.

In the meantime, traders on Wednesday will take cues from speeches by influential FOMC members amid the absent relevant market-moving economic releases. Apart from this, the US bond yields and the broader market risk sentiment should allow traders to grab short-term opportunities around the USDJPY pair.

Technical levels to watch