USD/JPY climbs closer to monthly peak, 144.00 mark back in sight as traders await US CPI

• USD/JPY trades with a positive bias for the fourth successive day on Thursday.
• The divergent BoJ-Fed policy outlook continues to lend support to the major.
• Bulls, however, seem reluctant and prefer to wait for the crucial US CPI report.

The USD/JPY pair climbs back closer to the monthly peak during the Asian session on Thursday and currently trades around the 143.80 region, up for the fourth successive day.

The Japanese Yen (JPY) continues to be undermined by the growing acceptance that the Bank of Japan (BoJ) will stick to its dovish stance and turns out to be a key factor acting as a tailwind for the USD/JPY pair. In fact, the BoJ, in its Summary of Opinions for the July 28 meeting, said it still has a significantly long way to go before revising its stance on the negative interest rate policy. This marks a big divergence in comparison to a relatively more hawkish stance adopted by other major central banks, including the Federal Reserve (Fed), which, along with a modest US Dollar (USD) uptick, lends support to the major.

In fact, the markets now seem convinced that the US central bank will keep interest rates higher for longer in the wake of an extremely resilient economy. The expectations were reaffirmed by the latest US jobs report last Friday, which indicated the continued tightness in the labour market and raised the odds of a soft economic landing. This, in turn, keeps the door for one more 25 bps lift-off in September or November wide open and allows the yield on the benchmark 10-year US government bond to hold steady above the 4.0% threshold. Elevated US bond yields lend support to the buck and the USD/JPY pair.

The USD bulls, however, seem reluctant to place aggressive bets and prefer to wait for the release of the latest US consumer inflation figures, due later during the early North American session. The crucial US CPI report will influence expectations about the Fed's future rate-hike path, which, in turn, should drive the USD demand and provide a fresh directional impetus to the USD/JPY pair. In the meantime, a generally weaker risk tone could benefit the JPY's relative safe-haven status and keep a lid on any meaningful upside or spot prices, warranting some caution before positioning for further intraday gains.

Technical levels to watch