USD/JPY consolidates in a range around mid-139.00s, below weekly top set on Wednesday

• USD/JPY is seen oscillating in a narrow trading band through the Asian session on Thursday.
• Reviving safe-haven demand benefits the JPY and caps the pair amid a subdued USD demand.
• Less hawkish remarks by BoJ’s Ueda should act as a headwind for the JPY and limit losses.

The USD/JPY pair lacks any firm intraday direction and oscillates in a narrow trading band around mid-139.00s through the Asian session on Thursday, below the one-week high touched the previous day.

Against the backdrop of concerns over slowing economic growth in China, the worsening US-China ties and geopolitical tensions lend some support to the safe-haven Japanese Yen (JPY), which, in turn, acts as a headwind for the USD/JPY pair. In fact, China's ambassador to Washington said on Wednesday that China does not want a trade or tech war but will respond if the US imposes more curbs on imports of equipment to make advanced chips. Russia's defence ministry declared that any ships heading to Ukraine's Black Sea ports would be viewed as potential carriers of military cargo and party to the conflict from Thursday.

The US Dollar (USD), on the other hand, struggles to capitalize on the recent recovery from its lowest level since April 2022 touched on Tuesday in the wake of expectations for a less hawkish Federal Reserve (Fed). The markets have been pricing out the possibility of any further interest rate hikes following the widely expected 25 bps lift-off in July. This had been a key factor behind the recent sharp pullback in the US Treasury bond yields and caps gains for the Greenback. The downside for the USD/JPY pair, meanwhile, seems cushioned on the back of Bank of Japan (BoJ) Governor Kazuo Ueda's dovish remarks earlier this week.

Speaking at a news conference after the G20 meeting in India on Tuesday, Ueda pushed back against speculations of a BoJ policy shift and signalled to maintain ultra-loose monetary policy for the time being. Ueda noted that there is still some distance to sustainably achieve the 2% inflation target. He further added that if the assumption is unchanged, the BoJ's overall narrative on monetary policy will remain unchanged. Hence, the focus will remain on the Japanese National Core CPI print, due Friday. In the meantime, traders on Thursday will take cues from the US macro data, due later during the early North American session.

The US economic docket features the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data. Apart from this, the US bond yields will influence the USD price dynamics, which, along with the broader risk sentiment, should contribute to producing short-term trading opportunities around the USD/JPY pair.

Technical levels to watch