USD/JPY struggles for a firm intraday direction, stuck in a range around mid-134.00s

• USD/JPY remains confined in a narrow trading band through the Asian session on Friday.
• Reviving safe-haven demand benefits the JPY and acts as a headwind amid a softer USD.
• Traders now look to the Michigan US Consumer Sentiment Index for a fresh impetus.

The USD/JPY pair struggles to capitalize on the overnight bounce from the 133.75 area, or a one-week low and oscillates in a narrow trading band through the Asian session on Friday. The pair is currently placed just above mid-134.00s, nearly unchanged for the day, and is influenced by a combination of diverging forces.

The market sentiment remains fragile amid worries over a global economic slowdown, magnified by softer Chinese inflation figures and US labor market data on Thursday. This, along with concerns about the US debt ceiling, dents investors' appetite for riskier assets, which lends some support to the safe-haven Japanese Yen (JPY) and acts as a headwind for the USD/JPY pair. The US Dollar (USD), on the other hand, is undermined by the recent decline in the US Treasury bond yields. This further contributes to capping gains for the major.

That said, the downside for the USD seems cushioned amid the uncertainty over the Federal Reserve's (Fed) ned policy move. The US CPI report released on Wednesday pointed to further signs of inflationary pressures and should allow the US central bank to pause its year-long rate-hiking cycle. Investors, however, remain divided over the possibility of a rate cut later this year. This, along with a more dovish stance adopted by the Bank of Japan (BoJ), should hold back traders from placing aggressive bearish bets around the USD/JPY pair.

The aforementioned fundamental backdrop seems tilted slightly in favour of bullish traders and supports prospects for some intraday positive move. Hence, some follow-through strength back towards reclaiming the 135.00 psychological mark, en route to the weekly high, around the 135.45-135.50 region, looks like a distinct possibility. Market participants now look forward to the release of the Preliminary Michigan Consumer Sentiment Index from the US, which might influence the USD price dynamics and provide some impetus to the USD/JPY pair.

Technical levels to watch