USD/JPY tracks US Treasury yields to snap three-day uptrend around 110.50 ahead of Fed’s Powell
- USD/JPY trims intraday losses, the first in four days.
- US Treasury yields drown DXY amid pre-Powell caution, after strong US CPI.
- Japan Reuters-Tankan survey, Industrial Production came in mixed, covid concerns remain elevated.
USD/JPY recovers from intraday low to 10.52, down 0.11% on a day, as European traders brace for Wednesday’s bell. In doing so, the risk barometer pair portrays the US dollar’s pullback as well as the coronavirus (COVID-19) woes in Asia-Pacific.
The US dollar index (DXY) steps back from a monthly high, down 0.09% around 92.70 by the press time, to portray the first daily loss during the week. While the market sentiment remains subdued, the greenback gauge seems to prepare for Fed Chairman Jerome Powell’s testimony. Also exerting downside pressure on the DXY could be the US Treasury yields that snap the three-day uptrend.
Behind the moves could be the details of the US Consumer Price Index (CPI) that suggested fuel prices to be the main cause of the jump to 5.4% YoY, which in turn justifies the Fed’s “transitory” outlook on inflation.
It’s worth noting that the covid woes in Australia, Japan and the West exert additional downside pressure on the USD/JPY prices. Amid these plays, S&P 500 Futures print mild losses.
Mixed prints of Japanese data relating to manufacturing sentiment and Industrial Production also confuse traders and weigh on the pair prices. The Reuters-Tankan survey for June 30 to July 09 period suggests, “Japanese manufacturers’ business confidence rose in July to hit a more than two-and-a-half-year high.” Alternatively, Industrial Production for May eased below 22.0% expected and prior to 21.10%.
Looking forward, USD/JPY traders need to pay attention to the covid updates but Fed’s Powell will be the key catalyst for today. Should Powell hesitate in reiterating the defensive statements, the pair could regain the upside strength.
Read: Powell Preview: Three reasons to expect the Fed Chair to down the dollar
Technical analysis
A convergence of 10-day and 21-day SMA around 110.65 becomes a short-term key hurdle for USD/JPY buyers to cross before targeting the late June tops surrounding 111.10.