USD/JPY hangs near multi-week low touched on Wednesday, just above mid-114.00s

• USD/JPY was seen consolidating the overnight post-US CPI slide to a near three-week low.
• Rebounding US bond yields helped ease the USD bearish pressure and extended support.
• The cautious mood underpinned the safe-haven JPY and capped any meaningful recovery.

The USD/JPY pair oscillated in a narrow range above mid-114.00s heading into the European session and consolidated the overnight slide to a near three-week low.

Following an early uptick to the 115.45 area, the USD/JPY pair witnessed aggressive selling on Wednesday amid the post-US CPI broad-based US dollar sell-off. The data reaffirmed expectations that the Fed will begin raising interest rates in March, though was not deemed worrying enough to change an already hawkish outlook and weighed heavily on the buck.

As investors digest a surge in the US consumer prices, the greenback found some support amid a goodish rebound in the US Treasury bond yields. This, in turn, was seen as a key factor that extended some support to the USD/JPY pair. That said, the cautious market mood benefitted the safe-haven Japanese yen and kept a lid on any meaningful recovery, at least for now.

Meanwhile, the USD/JPY pair's inability to gain any meaningful traction suggests that the near-term bearish trend might still be far from being over. A subsequent slide below the overnight swing low, around the 114.40-35 area, will reaffirm the negative outlook and pave the way for an extension of the recent pullback from a five-year high touched on January 4.

Traders now look forward to the US economic docket, featuring the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims later. This, along with Fed Governor Lael Brainard's testimony on her nomination as Vice Chair and the US bond yields, will influence the USD. Apart from this, the broader market risk sentiment might provide some impetus to the USD/JPY pair.

Technical levels to watch