USD/JPY edges lower above 110.00 amid steady US Treasury yields ahead of BOJ

  • USD/JPY eases from intraday high but reverses pullback from April’s high.
  • Market sentiment improves during post-Fed consolidation, amid a lack of major catalysts.
  • Japan National CPI improves in May, government official cites electricity, gasoline price rebound as the cause.
  • BOJ is widely expected to repeat the status-quo, covid-aid statement eyed.

USD/JPY fades early Asian bounce but prints mild gains amid sluggish start to Friday’s Tokyo trading. The reason could be linked to the mixed performance of US Treasury yields and the S&P 500 Futures amid a light calendar and pre-BOJ caution.

Recovery in Japan’s inflation data may have helped USD/JPY prices earlier. That said, Japan’s National Consumer Price Index (CPI) rose recovered from -0.4% to -0.1% YoY in May, versus a 0.7% forecast. On the same line, National CPI ex Fresh Food matched upbeat forecasts of +0.1% compared to -0.1% prior.

It’s worth noting that the mildly positive market sentiment may have taken its clues from the increasing odds of US President Joe Biden’s Infrastructure spending passage as well as Japan’s decision to remove virus-led emergency from most prefectures except for Tokyo. Additionally, increasing talks over the UK’s early unlock, compared to the recently announced four-week delay to June 21 deadline, also helps traders to consolidate the previous two-day losses, mainly linked to the US Federal Reserve’s (Fed) rate-hike signals.

Amid these plays, Japan’s Nikkei 225 rises 0.17% intraday whereas the US 10-year Treasury yield rises one basis point (bp) to 1.52% after declining five bps the previous day.

Looking forward, the Bank of Japan’s (BOJ) monetary policy decision is less likely to offer any dramatic moves to the USD/JPY as the Japanese central bank is widely expected to keep the easy money flowing. However, the central bank’s chattered intent to extend pandemic-related relief measures till September may help the bulls afterward.

Technical analysis

A five-week-old ascending trend channel keeps USD/JPY buyers hopeful between 110.80 and 109.60 wherein the upper boundary gains strength from April’s high. Also acting as the upside barrier is March’s low near 111.00. Meanwhile, the mid-March top surrounding 109.40 and the monthly bottom close to 109.20 offer extra filters to the south.

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