USD/JPY consolidates in a range above mid-115.00s, US Retail Sales/FOMC minutes awaited

• A positive risk tone undermined the safe-haven JPY and extended support to USD/JPY.
• Modest USD weakness held bulls on the defensive and capped the upside for the pair.
• Hawkish Fed expectations, elevated US bond yields should act as a tailwind for the USD.
• Investors now eye US Retail Sales for some impetus ahead of the FOMC meeting minutes.

The USD/JPY pair traded with a mild positive bias through the early European session and was last seen hovering near the daily high, around the 115.70 region.

Following the previous day's good two-way price moves, the USD/JPY pair edged higher on Wednesday and seems all set to build on this week's bounce from the key 115.00 psychological mark. Receding fears about a conflict between Russia and the West over Ukraine remained supportive of a generally positive risk tone. This, in turn, undermined the Japanese yen's safe-haven status and extended some support to the USD/JPY pair.

On the other hand, the US dollar witnessed subdued/range-bound price action through the first half of the trading and failed to impress bulls or provide an additional lift to the USD/JPY pair. That said, the prospects for a faster policy tightening by the Fed, reaffirmed by elevated US Treasury bond yields, should act as a tailwind for the greenback. This supports prospects for a further appreciating move for the major.

The markets seem convinced that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation and have been pricing in a 50 bps rate hike in March. Hence, the focus will remain glued to the FOMC meeting minutes, due for release later during the US session. Investors will look for clues about the pace of the Fed's policy tightening cycle, which would influence the near-term USD price dynamics.

In the meantime, the US monthly Retail Sales data, along with the US bond yields will drive the USD demand and provide some impetus to the USD/JPY pair. Apart from this, the broader market risk sentiment should allow traders to grab some short-term opportunities.

Technical levels to watch