USD/JPY eases from daily high, trades with modest gains just above 115.00 mark

• USD/JPY staged a goodish rebound from a two-week low touched earlier this Friday.
• A recovery in the risk sentiment undermined the safe-haven JPY and extended support.
• Subdued USD demand held back bulls from placing aggressive bets and capped gains.

The USD/JPY pair retreated a few pips from the daily high and was last seen trading just above the 115.00 psychological mark during the early European session.

Receding safe-haven demand undermined the Japanese yen and assisted the USD/JPY pair to stage a goodish rebound from the 114.80-114.75 region, or a two-week low touched earlier this Friday. The US Secretary of State Antony Blinken agreed to a meeting with Russian Foreign Minister Sergei Lavrov late next week and raised hopes for a diplomatic solution to the Ukraine crisis. This, in turn, led to a recovery in the global risk sentiment and drove investors away from traditional safe-haven assets.

That said, fears of an imminent Russian invasion of Ukraine held back bulls from placing aggressive bets. In fact, UK Prime Minister Boris Johnson and US President Joe Biden accused Russia of fabricating a pretext to invade Ukraine. It is worth recalling that Russian media reported on Thursday that rebels in eastern Ukraine accused government forces of shelling their territory. This should keep a lid on the optimistic move in the markets and the USD/JPY pair amid subdued US dollar demand.

The latest geopolitical developments raised uncertainty about the Fed's tightening plans to combat stubbornly high inflation. This comes on the back of less hawkish FOMC meeting minutes released on Wednesday, which, in turn, weighed on the greenback. Hence, it will be prudent to wait for some follow-through buying before placing aggressive bullish bets around the USD/JPY pair. Market participants now look forward to the US Existing Home Sales data, due later during the early North American session.

The data might influence the USD price dynamics and provide some impetus to the USD/JPY pair. Apart from this, traders will take cues from the broader market risk sentiment to grab some short-term opportunities on the last day of the week.

Technical levels to watch