USD/JPY eases from four-week high near 134.00, awaits US CPI and FOMC minutes

• USD/JPY climbs to a four-week high on Wednesday, though lacks follow-through.
• The fundamental backdrop still supports prospects for additional near-term gains.
• Traders now look to the US CPI and FOMC minutes for some meaningful impetus.

The USD/JPY pair touches a four-week high on Wednesday, albeit struggles to capitalize on the move and remains below the 134.00 mark through the early part of the European session.

The US Dollar (USD) languishes near the weekly low amid growing acceptance that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle and acts as a headwind for the USD/JPY pair. Apart from this, looming recession risks seem to benefit the safe-haven Japanese Yen (JPY) and further contribute to keeping a lid on the major. In fact, the International Monetary Fund (IMF) on Tuesday trimmed its 2023 global growth outlook, citing the impact of higher interest rates.

That said, the Bank of Japan's (BoJ) dovish near-term outlook continues to undermine the JPY and should help limit losses for the USD/JPY pair. It is worth recalling that the new BoJ Governor Kazuo Ueda said on Monday it was appropriate to maintain the ultra-loose stance as inflation has yet to hit 2% as a trend. In contrast, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC meeting in May and the bets were lifted by the upbeat US NFP report.

This, for the time being, puts a floor under the US Treasury bond yields and lends some support to the Greenback. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the latest US consumer inflation figures, due later during the early North American session. This will be followed by the FOMC minutes, which will be looked upon for clues about the future rate-hike path and play a key role in influencing the near-term USD price dynamics.

From a technical perspective, acceptance above 50 and 100-day Simple Moving Averages (SMAs) could be seen as a fresh trigger for bulls, suggesting that the path of least resistance for the USD/JPY pair is to the upside. Hence, any meaningful corrective pullback is more likely to attract fresh buying at lower levels and remain limited, at least for the time being.

Technical levels to watch