USD/JPY bulls approach mid-132.00s despite downbeat US Treasury yields

• USD/JPY prints mild gains to defend the previous day’s recovery amid a sluggish session.
• Yen fails to cheer upbeat signals from Japanese policymakers as cautious traders prefer US Dollar.
• US inflation is the key to watch for clear directions after central bankers failed to guide markets.

USD/JPY picks up bids to 132.45 during early Wednesday’s sluggish trading as market sentiment appears cautiously optimistic. In doing so, the Yen pair ignores the downbeat prints of the US Treasury yields.

Risk appetite improves during the lackluster day after global central bankers, led by Fed Chair Jerome Powell, refrained from any major signals during their stints at the Riksbank event. On the same line could be the updates from Chinese media suggesting an improvement in investment momentum in the dragon nation.

Elsewhere, Japan’s Chief Cabinet Secretary Hirokazu Matsuno praised Japanese companies’ policies for wage hikes. Earlier in the day, Japan’s Ministry of Finance (MOF) Financial Bureau Chief Michio Saito crossed wires, via Reuters, as he teased higher rates.

It should, however, be noted that the World Bank’s grim economic forecasts join a cautious mood ahead of Thursday’s inflation data from the US to challenge USD/JPY traders. On Tuesday, the World Bank (WB) came out with its revised economic forecasts. That said, the WB stated that it expects the global economy to grow by 1.7% in 2023, down sharply from 3% in June's forecast, as reported by Reuters. The Washington-based institute also raised fears of global recession by citing the scale of recent slowdowns.

While portraying the mood, US 10-year Treasury bond yields retreat to 3.58% after rising 10 basis points (bps) to 3.61% the previous day. On the same line, the upbeat Wall Street closing helps S&P 500 Futures to print mild gains around 3,945.

Looking forward, USD/JPY traders should pay attention to the risk catalysts ahead of the key US Consumer Price Index (CPI) for December, up for publishing on Thursday. Should the headline inflation data arrive as stronger, the Fed’s hesitance in accepting dovish bias could gain the market’s attention and may add strength to the USD/JPY run-up.

Technical analysis

A clear upside break of the 10-DMA, around 132.00 by the press time, signals another attempt by the USD/JPY pair to cross the 21-DMA hurdle, close to 133.25 at the latest.