USD / JPY remains on the defensive, decline seems limited ahead of US CPI.

• USD / JPY is witnessing a modest pullback from the weekly highs, although there is no continuation.
• A modest USD strength and rally in US bond yields offer some support to the pair.
• Investors could refrain from opening aggressive positions before the latest US CPI report.

The pair USD/JPY moves lower during the European session on Thursday and recedes towards the 109.50 region, dropping around 20 pips from the weekly highs set earlier in the day.

The pair has struggled to capitalize on the good bounce the day before, from near the support of the 50-day SMA near the 109.20 region, and has encountered new selling on Wednesday. However, A combination of factors has prevented investors from opening aggressive bearish positions around the USD / JPY pair., which has helped to limit the fall.

The US dollar has gained some traction amid certain repositioning prior to the release of US consumer inflation figures, which will be announced later at the beginning of the American session. Apart of this, a modest rebound in US Treasury yields. it has further benefited the dollar and offered some support to the USD / JPY pair.

Market attention will remain glued to the US CPI report, which will be an important macroeconomic data that will set the tone for the next FOMC meeting on June 15-16. This, in turn, will play a key role in influencing the short-term USD price dynamics and help investors determine the next directional move for the USD / JPY pair.

Before the key data, investors might prefer to stay on the sidelines. This could lead to moderate price action within a range amid the prevailing cautious mood.

USD / JPY technical levels