USD/JPY struggles for a firm direction, consolidates in a range around 132.00 mark

• USD/JPY remains confined in a narrow trading band through the early European session.
• Rebounding US bond yields revives the USD demand and extends support to the major.
• Bets for less aggressive Fed rate hikes could cap the buck and limit any meaningful gains.

The USD/JPY pair continues with its struggle to gain any meaningful traction and oscillates in a narrow trading range for the second successive day on Tuesday. The pair is currently placed around the 132.00 round-figure mark, nearly unchanged for the day, and is influenced by a combination of factors.

The US Dollar stalls its recent downfall and regains some positive traction, which, in turn, is seen as a key factor lending support to the USD/JPY pair. A modest uptick in the US Treasury bond yields is seen acting as a tailwind for the USD amid some repositioning trade ahead of Fed Chair Jerome Powell's speech later during the early North American session. Investors will look for clues about the pace of Fed rate hikes at the upcoming meetings. This will influence the USD demand and provide some meaningful impetus to the major.

In the meantime, rising bets for relatively smaller rate hikes by the US central bank should keep a lid on any further upside for the US bond yields and the greenback. Apart from this, a softer risk tone could underpin the safe-haven Japanese Yen and contribute to capping the USD/JPY pair. Despite China's pivot away from its strict zero-COVID policy, looming recession fears weigh on investors' sentiment. This, along with speculations that the Bank of Japan will eventually phase out its ultra-lose policy settings warrant caution for bulls.

Moving ahead, there isn't any major market-moving economic data due for release from the US on Tuesday. Hence, the focus will remain glued to Powell's speech, which, along with the US bond yields, could drive the greenback and provide some impetus to the USD/JPY pair. Apart from this, the broader market risk sentiment will be looked upon to grab short-term trading opportunities around the major. The fundamental backdrop, meanwhile, favours bearish traders and supports prospects for an extension of the recent slide from over a three-decade high.

Technical levels to watch