• USD/JPY struggles to gain any meaningful traction amid a combination of diverging forces.
• Middle East tensions benefit the USD and support the pair amid delayed BoJ rate hike bets.
• Intervention fears hold back the JPY bears from placing aggressive bets and cap spot prices.

The USD/JPY pair extends its sideways consolidative price move through the early European session on Tuesday. Spot prices remain below the highest level in over five weeks, touched the precious day, and currently trade below mid-157.00s, nearly unchanged for the day.

Following a modest intraday downtick, the US Dollar (USD) attracts fresh buyers for the second straight day and climbs to its highest level since January 20. Against the backdrop of reduced bets for more aggressive easing by the US Federal Reserve (Fed), a further escalation of geopolitical tensions in the Middle East continues to benefit the Greenback's status as the global reserve currency. This turns out to be a key factor acting as a tailwind for the USD/JPY pair.

Meanwhile, Reuters reported that sources familiar with the central bank’s thinking stated that fresh market volatility triggered by the Middle East conflict has heightened the chance the Bank ​of Japan (BoJ) will hold off on raising rates in March. This comes on top of Japanese Prime Minister Sanae Takaichi's reservations about additional monetary tightening by the BoJ, which keeps the Japanese Yen (JPY) bulls on the defensive and further supports the USD/JPY pair.

Investors, however, still seem convinced that the BoJ will stick to its policy normalization path. This, along with speculations that authorities would step in to stem further JPY weakness, caps the upside for the USD/JPY pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the upside, and any corrective pullback could be seen as a buying opportunity amid persistent geopolitical uncertainties.