USD/JPY consolidates in a range below mid-115.00s, focus remains on US CPI

• USD/JPY was seen oscillating in a range through the early part of trading on Wednesday.
• A positive risk tone undermined the safe-haven JPY and extended some support to the pair.
• Powell’s less hawkish comments weighed on the USD and capped gains ahead of the US CPI.

The USD/JPY pair seesawed between tepid gains/minor losses and remained confined in a narrow trading band below mid-115.00s heading into the European session.

A combination of diverging forces failed to provide any meaningful impetus to the USD/JPY pair and led to subdued/range-bound price action through the early part of the trading on Wednesday. A generally positive tone around the equity markets undermined the safe-haven Japanese yen and extended some support to the major. That said, the prevalent US dollar selling bias held back traders from placing fresh bullish bets.

Fed Chair Jerome Powell sounded less hawkish during his renomination hearing before the Senate on Tuesday and dragged the US Treasury bond yields lower. In fact, Powell said that it could take several months to decide on running down the central bank's balance sheet and eased fears about a sudden withdrawal of monetary support. This, in turn, was seen as a key factor that weighed on the buck and acted as a headwind for the USD/JPY pair.

Meanwhile, Powell didn't push back against market expectations for an eventual Fed lift-off in March 2022, which helped limit any deeper USD losses. Investors also seemed reluctant and preferred to wait on the sidelines ahead of Wednesday's release of the US consumer inflation figures, due later during the early North American session. This further warrants some caution before confirming the intraday direction for the USD/JPY pair.

Technical levels to watch