The USD/JPY pair attracts some sellers near the 130.60 area and turns lower for the second successive day on Wednesday. The pair maintains its offered tone heading into the North American session and is currently placed near the daily low, around the 129.75-129.70 region.
A combination of factors provides a modest lift to the Japanese Yen, which, in turn, is seen exerting some downward pressure on the USD/JPY pair. Despite the Bank of Japan's (BoJ) dovish decision last week, market participants seem convinced that high inflation may invite a more hawkish stance from the central bank later this year. Apart from this, a fresh wave of the global risk-aversion trade benefits the JPY's relative safe-haven status.
The market sentiment remains fragile amid looming recession risks, fueled by worries about the economic headwinds stemming from the worst yet COVID-19 outbreak in China and the protracted Russia-Ukraine war. Moreover, the latest report by World Bank noted that the global economy is now in its steepest slowdown following a post-recession recovery since 1970. This, in turn, is seen weighing on investors' sentiment and driving some haven flow to the JPY.
The global flight to safety, meanwhile, assists the US Dollar to gain some positive traction and move away from a nine-month low. This could lend some support to the USD/JPY pair and help limit deeper losses. Traders might also refrain from placing aggressive bets ahead of this week's important US macro releases, which might influence the Fed's rate-hiking cycle. This will drive the USD demand and provide a fresh directional impetus to the major.
In the meantime, the broader market risk sentiment, along with the USD price dynamics, will be looked upon to grab short-term opportunities around the USD/JPY pair in the absence of any relevant macro data from the US. Nevertheless, the recent price action and the fundamental backdrop suggest that the recent bearish trend might still be far from being over. Hence, any attempted recovery move could get sold into and remain limited, for the time being.
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