- USD/JPY prints mild gains to snap two-day losing streak, recently easing from intraday top.
- US Treasury yields dropped the most in three months the previous day.
- Russian invasion of Ukraine intensifies despite extended peace talks.
- No major data from Japan but US ISM Manufacturing PMI, Biden’s speech will decorate calendar, geopolitics is the key.
USD/JPY retreats from intraday top surrounding 115.10 as Tokyo opens for Tuesday. Even so, the yen pair remains mildly bid by the press time, posting the first daily gains in three.
The reason could be linked to the US Treasury yields’ pause after the previous day’s heavy downside, as well as mixed concerns over the Russia-Ukraine issues and a lack of major data/events during the initial Asian session.
US 10-year Treasury yields dropped the most since early December 2021 the previous day, which in turn weighed on the US Dollar Index (DXY).
The fall in the US bond yields can be well connected to the receding hawkish mood at the Fed and downbeat inflation expectations. That said, US inflation expectations, as measured by the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, don’t comply with the recently easing Fed chatters as the gauge jumped to the highest since November 23, marked a 2.62% figure by the end of Monday’s North American session. It should be noted that the CME’s FedWatch Tool marked nearly 5.0% probabilities of a 0.50% Fed rate hike in March, versus more than 50% before a few days.
Elsewhere, negotiations between Russia and Ukraine concluded without any core results, as expected. The diplomats assured further talks during this week but Moscow isn’t ready to step back as Russian troops bombard civilian buildings in Kyiv. On the other hand, Ukraine President Zelenskyy was quoted by Reuters’ reporter Phil Stewart to consider a no-fly zone for Russian missiles, planes and helicopters. The same would push the US to jump into the battle, as signaled earlier by the White House (WH). However, the WH press secretary Jen Psaki on Monday ruled out the idea of using US troops to create a no-fly zone over Ukraine amid the Russian invasion of the eastern European country.
Amid these plays, the US 10-year Treasury yields seesaw around 1.84%, the lowest level in a month whereas the S&P 500 Futures print mild gains at the latest.
Looking forward, China and the US PMIs for February will precede US President Joe Biden’s State Of The Union (SOTU) speech to direct short-term USD/JPY moves. Above all, geopolitical headlines will be the key to fresh impulse.
Although pullback from “double-tops” marked around 116.35 keeps USD/JPY sellers hopeful, a convergence of the three-month-old support line and the 100-DMA, near 114.40, appears a tough nut to crack for the bears.