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USD/JPY bears approach 132.00 as yields drop on softer US PMI, downbeat Fed concerns

  • USD/JPY remains depressed after reversing from two-week high.
  • Yields drop as US PMI traces downbeat inflation clues, receding hawkish Fed bets.
  • Japan PM Kishida assures stable financial system at home, pledges more investments.
  • Tuesday’s light calendar can allow Yen pair to consolidate recent losses if risk catalysts permit.

USD/JPY slides to 132.20 while extending the week-start reversal from the highest level in a fortnight. That said, the Yen pair’s latest losses could be linked to the downbeat US Treasury bond yields, as well as softer data, not to forget upbeat comments from Japan Prime Minister Fumio Kishida.

After assuring the stability of the financial system at home, Japan PM Kishida pledged more investment to please the Yen pair sellers. “It is necessary to speed up private investment through green transformation bonds to promote decarbonization domestically,” said Japan PM Kishida.

Talking about the yields, the US 10-year Treasury bond yields dropped in the last four consecutive days to 3.42% at the latest while the two-year counterpart marked a two-day downtrend in the last to 3.97%.

Softer US PMIs joined the market’s lack of inflation fears from the OPEC+ supply cuts and the resulting Oil price run-up to weigh on the yields. That said, the US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations.

At home, Japan’s Tankan Large Manufacturing Index for the first quarter (Q1) of 2023, a closely observed output guide by the Bank of Japan (BoJ), eased to 1.0 from 7.0 previous readings and 3.0 expected. On the other hand, Japan’s Jibun Bank Manufacturing PMI for March improved to 49.2 from 48.6 previous. However, the below-50 figure suggests a contraction in private manufacturing activities.

It should be noted that the downbeat Fed calls also weigh on the yield and the USD/JPY prices. As per the latest read, the CME’s FedWatch Tool marked nearly 43% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.

Amid these plays, Wall Street closed mixed and the yields were down while the US Dollar Index (DXY) dropped the most in a fortnight the previous day to test the lowest levels in two months. Further, the S&P 500 Futures struggle for clear directions.

Moving forward, USDJPY may pare recent losses amid a light calendar but downbeat yields and inflation fears, led by the OPEC+ surprise, may weigh on the Yen pair ahead of this week’s key US jobs report, up for publishing on Friday.

Technical analysis

A U-turn from the 100-DMA, around 133.75 by the press time, directs USD/JPY towards an ascending support line from mid-January, close to 130.70 at the latest.

Additional important levels

Overview
Today last price132.32
Today Daily Change-0.55
Today Daily Change %-0.41%
Today daily open132.87
 
Trends
Daily SMA20133.27
Daily SMA50132.95
Daily SMA100133.87
Daily SMA200137.32
 
Levels
Previous Daily High133.6
Previous Daily Low132.59
Previous Weekly High133.6
Previous Weekly Low130.41
Previous Monthly High137.91
Previous Monthly Low129.64
Daily Fibonacci 38.2%133.21
Daily Fibonacci 61.8%132.97
Daily Pivot Point S1132.44
Daily Pivot Point S2132.01
Daily Pivot Point S3131.43
Daily Pivot Point R1133.45
Daily Pivot Point R2134.03
Daily Pivot Point R3134.46

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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