USD/JPY marches to 133.50 as yields, US Dollar recover ahead of NFP

USD/JPY takes the bids to refresh intraday high near 133.50 as bulls keep the reins after witnessing the first weekly gain in five.

The Yen pair’s latest gains could be linked to the firmer US Treasury bond yields, as well as the US Dollar, as markets await the all-important Nonfarm Payrolls (NFP), up for publishing on Friday. Adding strength to the USD/JPY pair’s run-up could be the latest challenges to the sentiment, mainly emanating from the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, known as OPEC+. However, the mixed data at home and anxiety ahead of top-tier US statistics challenge the pair buyers of late.

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.

On the other hand, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, declined to 4.6% YoY in February from 4.7% expected and prior. On a monthly basis, Core PCE inflation rose 0.3% while easing below the market expectation of 0.4% and a downwardly revised 0.5% previous reading.

It’s worth observing that the receding hawkish calls surrounding the Bank of Japan (BoJ) also favor USD/JPY buyers. However, the recent easing calls of the Fed’s hawkish moves, as well as easing fears of the banking crisis, seem to gain little attention.

Against this backdrop, Japan’s Nikkei 225 rises 1.0% intraday to 28,041 by the press time but the S&P 500 Futures snapped a three-day uptrend near the highest levels since mid-February.

On the other hand, the US 10-year and two-year Treasury bond yields print mild gains near 3.52% and 4.11% while paring the latest losses. It should be noted that the benchmark US 10-year Treasury bond yields dropped for the past three weeks and the past three consecutive days.

Looking ahead, USD/JPY is likely to extend the latest rebound amid a light calendar and firmer yields. However, receding hawkish bets on the Fed may weigh on the US Dollar prices should the incoming PMIs and Nonfarm Payrolls (NFP) disappoint the greenback buyers.

Technical analysis

An upside break of 50-DMA, close to 133.00 at the latest, joins bullish MACD signals and firmer RSI (14), not overbought to direct USD/JPY buyers towards the 100-DMA hurdle of around 133.85.