USD/JPY retreats further from 24-year peak, below 136.00 mark after Powell’s remarks

• USD/JPY corrected from a fresh 24-year high and was pressured by a combination of factors.
• Speculations that authorities could intervene, the risk-off mood boosted the safe-haven JPY.
• The lack of hawkish signals from Powell weighed on the USD and added to the selling bias.

The USD/JPY pair witnessed an intraday retracement slide from a 24-year high, around the 136.70 region touched earlier this Wednesday and eroded a part of the previous day's strong gains. The intraday slide extended through the early North American session and dragged spot prices to a fresh daily low, around the 135.70-135.65 region.

Market players turned caution amid speculations that any further sharp depreciation of the Japanese yen might force some form of practical intervention. This, along with a fresh wave of the global risk-aversion trade, boosted the safe-haven JPY and prompted traders to take some profits off their bullish bets around the USD/JPY pair.

The anti-risk flow triggered a sharp pullback in the US Treasury bond yields, which failed to assist the US dollar to preserve its intraday gains. The USD was further pressured by less hawkish remarks by Philadelphia Fed President Patrick Harker, saying that if demand softens quicker than expected, a 50 bps rate hike for July may be good.

Separately, Fed Chair Jerome Powell, during his testimony before the Senate Banking Committee, said that the US central bank is strongly committed to bringing inflation down. Powell further added that the pace of future hikes will depend on the incoming data, which suggests real GDP picked up in the current quarter and consumer spending remains strong.

Powell's comments, however, failed to provide any clues about the pace of the Fed's policy tightening path, which could keep the USD bulls on the defensive. That said, a big divergence in the monetary policy stance adopted by the Fed and the Bank of Japan (dovish) should act as a tailwind for the USD/JPY pair, warranting caution for bearish traders.

Technical levels to watch