USD/JPY slides to 134.00 as US Treasury bond yields retreat

USD/JPY reverses from the highest levels in over a week as bears cheer downbeat US Treasury yields on Thursday’s Tokyo open. In doing so, the Yen pair prints the first daily loss in seven days, refreshing its intraday low near 133.90 by the press time.

That said, the US Treasury retreat from the multi-day high as traders await more clues while consolidating the latest run-up amid sluggish markets and a light calendar. That said, US 10-year Treasury yields decline 1.3 basis points (bps) to 3.873% after rising to the highest levels since November 14 the previous day.

It should be noted that the benchmark US bond coupons marked the biggest daily jump since late October on Wednesday and allowed the US Dollar Index (DXY) to print the second daily gain, around 104.38 at the latest.

The previous run-up in the US Treasury yields could be linked to the market’s lack of confidence in China’s unlock, as well as the geopolitical woes surrounding Russia.

News from Reuters suggesting inconsistent virus details from Beijing and multiple economies announcing fresh testing requirements from China previously weighed on the market sentiment and propelled the US Treasury yields. “China reported three new COVID-related deaths for Tuesday, up from one for Monday - numbers that are inconsistent with what funeral parlors are reporting, as well as with the experience of much less populous countries after they re-opened,” reported Reuters. Further, the US, South Korea, Japan, Taiwan, Italy and India all of them have recently announced fresh Covid test requirements for visitors from China.

The latest updates from Ukrainian Military and Russian offices also portray the escalation of the geopolitical tension and propel the US Dollar’s haven demand. “Russian forces increased mortar and artillery attacks on the city of Kherson more than six weeks after it was retaken by Ukrainian troops, while also exerting pressure along frontlines in the east,” said the Ukrainian Military office per Reuters. In this regard, Russia previously stated that the only agreements that account for the four additional territories joining Russia are feasible.

Elsewhere, the Bank of Japan (BOJ) Summary of Opinions and the latest comments from BOJ Governor Haruhiko Kuroda defy hopes of the Japanese central bank’s hawkish moves and weigh on the JPY, which in turn propelled the USD/JPY prices previously.

Moving on, US Initial Jobless Claims will decorate the economic calendar but major attention should be given to the US bond market moves for fresh impulse.

Technical analysis

Despite the latest pullback, the USD/JPY pair remains firmer beyond a one-week-old ascending support line, close to 133.40, which in turn joins bullish MACD signals to favor buyers. However, a convergence of the 21-DMA and downward-sloping resistance line from late October, close to 135.10, appears a tough nut to crack for the bulls.