USD/JPY climbs to one-month high around 115.70, focus remains glued to US CPI

• USD/JPY regained traction on Thursday and shot to a one-month high, around the 115.70 area.
• A generally positive risk tone undermined the safe-haven JPY and acted as a tailwind for the pair.
• Hawkish Fed expectations, elevated US bond yields remained supportive ahead of the US CPI data.

The USD/JPY pair continued scaling higher heading into the European session and touched a one-month high, around the 115.70 region in the last hour.

Following the previous day's modest downtick, the USD/JPY pair caught fresh bids on Thursday and might now be looking to build on its recent bullish momentum witnessed over the past one week or so. A generally positive tone around the equity markets undermined the safe-haven Japanese yen and acted as a tailwind for the major. Bulls further took cues from elevated US Treasury bond yields, bolstered by hawkish Fed expectations, which continued extending some support to the US dollar.

Investors seem convinced that the US central bank would adopt a more aggressive policy response to combat stubbornly high inflation. Moreover, the markets have been pricing in the possibility of a 50 bps Fed rate hike in March. This, in turn, had pushed the US bond yields to multi-year highs earlier this week. Hence, the US CPI report for January, due later during the early North American session, could provide fresh clues about the pace of the Fed's policy tightening cycle.

This, in turn, will play a key role in influencing the near-term USD price dynamics and help traders to determine the next leg of a directional move for the USD/JPY pair. Apart from this, Thursday's US economic docket also features the release of the usual Weekly Initial Jobless Claims. This, along with the US bond yields, will drive the USD demand. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

Technical levels to watch