- The USD/JPY pair begin on the wrong foot in the Asian session.
- Unchanged US T-bond yields boosted the Japanese yen, the USD fell.
- USD/JPY is upward biased, but it would need a daily close above 115.50-70.
As the Asian Pacific session kicks in, the USD/JPY is trading at 115.11 at the time of writing. The US cash equity markets closed in the green, while the US 10-year T-bond yield, which correlates positively with the USD/JPY, is flat at 1.784% at press time.
The market sentiment is upbeat. Asian equity futures are mixed, led by the Hang-Seng rising, while the biggest loser is the Australian ASX7200.
In the New York session, Fed speaking was in the spotlight. Most of them agreed that a hike rate in the March meeting is on the cards. Nevertheless, some divergences in the balance sheet loom. So any chances of the Quantitative Tightening (QT) starting in the March meeting seems unexpected.
Over the weekend, Atlanta’s Fed President Raphael Bostic crossed the wires. He stated that a 50 basis points hike is possible, but it would depend on economic data. Meanwhile, San Francisco Fed President Mary Daly said that she is uncomfortable with inflation this high and sees rate hikes as early as March. Daly further noted that if the Federal Funds Rate (FFR) hits 1.25% by the end of the year, it would still be supportive despite being a lot of tightening.
Later on, Kansas City Fed President Esther George noted that a more aggressive reduction of the balance sheet, coupled with hiking rates, would alter the yield curve, so she backpedaled some of her “hawkish” monetary policy stance.
Therefore, USD/JPY traders would lean on Japanese economic data crossing the wires at 23:30 GMT. Japanese Unemployment Rate for December came at 2.7%, below the 2.8% foreseen, in line with the previous reading. Later at 00:30 GMT, the Jibun Bank Manufacturing PMI for January could offer some cues to give direction to the pair.
USD/JPY Price Forecast: Technical outlook
On Monday, early in the Asian session, the USD/JPY peaked around 115.59, at the R1 daily pivot point, to then retreat towards the daily pivot point at 115.35 in the European session. However, when the North American session began, the pair slid under the 50-hour simple moving average (SMA), pushing the pair towards the 100-hour SMA at 114.90. As the session progressed, the US T-bond yield recovered the 1.78% threshold, and the pair jumped above the 115.00 figure.
That said, the USD/JPY is upward biased. The daily moving averages (DMAs) reside above the spot price, confirming the bias, but an upslope trendline around the 115.50-70 would be challenging to overcome for USD bulls. If the USD/JPY break above the previous mentioned, that would open the door towards 116.00. A breach of the latter would expose the YTD high at 116.35.