USD/JPY stages a goodish rebound from one-month lows, retakes 113.00 mark

• USD/JPY gained positive traction on Wednesday and recovered a part of the overnight losses.
• Rebounding US bond yields revived the USD demand and remained supportive of the move.
• The risk-off impulse could underpin the safe-haven JPY and cap gains ahead of the US CPI.

The USD/JPY pair climbed to fresh daily tops heading into the European session, with bulls now looking to build on the momentum beyond the 113.00 mark.

The pair attracted some buying during the early part of the trading action on Wednesday and recovered a part of the previous day's slide to near one-month lows. This marked the first day of a positive move in the previous five sessions and was sponsored by a pickup in the US Treasury bond yields.

Despite the Fed's dovish outlook, the markets have been pricing in the possibility of an interest rate hike in 2022 amid worries about a faster-than-expected rise in inflationary pressure. This, in turn, acted as a tailwind for the US bond yields and assisted the USD/JPY pair to gain some traction.

Meanwhile, rebounding US bond yields helped revive the US dollar demand, which was seen as another factor that contributed to the USD/JPY pair's modest intraday positive move. That said, the risk-off impulse might underpin the safe-haven Japanese yen and keep a lid on any further gains.

Investors might also refrain from placing aggressive bets ahead of Wednesday's release of the latest US consumer inflation figures, due later during the early North American session. The data will influence Fed rate hike expectations and provide a fresh directional impetus to the USD/JPY pair.

This makes it prudent to wait for a strong follow-through buying before confirming that the recent corrective pullback from multi-year tops has run its course. Hence, any subsequent move up is more likely to confront stiff resistance and meet with a fresh supply near the 113.60 region.

Technical levels to watch