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USDJPY today fell around 135.80 as it reversed a rebound from daily lows amid a sluggish start to the first week. The cautious mood of Yen traders ahead of the BoJ monetary policy meeting and the Fed Chair's annual testimony seems to be the main filter for Yen pairs this time.
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Based on the information we obtained from fxstreet.com, what could challenge the movement of quotes is the recent slowdown in the US Treasury yields and mixed signals from China. The US 10-year Treasury yields rose to their highest level since November 2022 last week before falling to 3.95% by the end of Friday, making the round to the same level at the slowest. Of note, the US 2-year yield jumped to the highest level seen in 2008 before falling around 4.45% at the time of writing. It should be noted that declining optimism about the Fed's hawkish move, mixed US data and the failure of Fed policymakers to impress USD/JPY bulls seem to be weighing on the yields lately. In addition, China's moderate growth expectations for 2023 and Sino-American tensions are additional filters for traders. With this, Atlanta Fed Bank President Raphael Bostic renewed concerns about the Fed’s policy pivot as the policymaker said the central bank is on track to end its current tightening cycle by mid-to-late summer. However, San Francisco Fed President Mary Daly said over the weekend that if inflation data and the labor market continue to heat up more than expected, then interest rates will have to be higher, and stay higher for longer than policymakers projected in December. In the same vein, the US Federal Reserve released its semi-annual monetary policy report on Friday: “further increases in the fed funds rate target are urgently needed.” The report also stated that the Fed is committed to lowering inflation to 2%. It is worth noting that BoJ officials and other incoming board members have recently defended the Japanese central bank’s ultra-loose monetary policy, putting a floor under the USD/JPY price. Furthermore, expectations that BoJ Governor Haruhiko Kuroda is playing his last ball with all his might also keep buyers of the yen pair hopeful despite the recent weakness in quotes.
On the other hand, Fed Chair Jerome Powell may have a hard time convincing markets amid pivot talk and mixed data. Even if he does, the US NFP will be closely watched for any clear direction.
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