USDJPY traces firmer yields to print mild gains around 139.50, focus on G20, Japan GDP

USDJPY licks its wounds at a 2.5-month low as it consolidates recent losses with 0.70% intraday gains around 139.50 as markets in Tokyo open for Monday.

In doing so, the yen pair justifies the recent cautious mood as bond traders return from a long weekend. Also likely to have challenged the USDJPY bears is the anxiety ahead of a meeting between US President Joe Biden and China's Prime Minister Xi Jinping on the sidelined of the Group of 20 Nations (G20) gathering in Bali.

Also likely to have triggered the USDJPY rebound could be the comments from Fed Governor Christopher Waller who tried to defend the bulls while saying, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling.”

While portraying the mood, the S&P 500 Futures retreat from a one-month high, down 0.30% intraday near 3,990, whereas the US 10-year Treasury yields rise six basis points (bps) to 3.89%, printing the first daily gains in four.

It’s worth noting, however, that the chatters surrounding the US Federal Reserve’s (Fed) pivot, mainly backed by the last week’s US Consumer Price Index (CPI) for October and the November month’s first readings of the University of Michigan Consumer Confidence Index.

Additionally, talks of the Japanese Finance Ministry’s intervention to defend the Yen (JPY) also drowned the USDJPY prices.

Alternatively, the Bank of Japan (BOJ) policymakers’ defense of easy money and challenge to the market’s optimism from Russia and China appear to keep the bears on their toes.

Moving on, updates from the Group of 20 Nations (G20) meeting in Bali could entertain market players amid a light calendar and also because US President Joe Biden and China's Prime Minister Xi Jinping will be meeting there. However, major attention will be given to the first readings of Japan’s third quarter (Q3) Gross Domestic Product (GDP) and the US Retail Sales for October amid hopes of easing divergence between the Fed and the BOJ.

Technical analysis

Although the nearly oversold RSI (14) challenges USDJPY bears, a daily closing below the 100-DMA, around 140.85 by the press time, keeps sellers hopeful of testing an upward-sloping support line from late May, around 137.00 by the press time.