USD/JPY hits one-week high around mid-135.00s, lacks follow-through ahead of US CPI

• USD/JPY gains traction for the fourth straight day and touches a one-week top.
• Dovish remains by the BoJ Governor Ueda weigh on the JPY and lend support.
• A modest USD downtick acts as a headwind ahead of the crucial US CPI report.

The USD/JPY pair edges higher for the fourth successive day on Wednesday and climbs to a one-week high, around mid-135.00s during the early European session.

The Japanese Yen (JPY) weakens a bit in reaction to dovish-sounding comments by the Bank of Japan (BoJ) Governor Kazuo Ueda and turns out to be a key factor pushing the USD/JPY pair higher. Speaking in parliament, Ueda said it was too early to discuss specific plans for an exit from the BoJ's massive stimulus programme, including how it could unload its huge holdings of exchange-traded funds (ETF). He added that the central bank will debate an exit strategy from its ultra-loose monetary policy, and communicate it to the public, once prospects to achieve stable inflation are in place. That said, a modest US Dollar weakness keeps a lid on any further gains for the major, at least for the time being.

Investors now seem convinced that the Federal Reserve (Fed) is nearing the end of its year-long rate-hiking cycle. This is evident from a softer tone around the equity markets, which fails to assist the USD to capitalize on its gains recorded over the past two trading sessions. Apart from this, the cautious market mood lends some support to the safe-haven JPY and acts as a headwind for the USD/JPY pair. Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the release of the latest US consumer inflation figures, due later today.

The crucial US CPI report will play a key role in influencing market expectations about the Fed's next policy move. This, in turn, should drive the USD demand in the near term and help investors to determine the next leg of a directional move for the USD/JPY pair. Nevertheless, the aforementioned mixed fundamental backdrop warrants some caution for bullish traders and before positioning for any further intraday appreciating move.

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