USD/JPY: Mildly bid above 133.00 as yields grind higher, BoJ’s Ueda eyes easy inflation

• USD/JPY picks up bids to reverses the previous day’s pullback from one-month high.
• BoJ’s new Governor Ueda defends current monetary policy, eyes easing inflation.
• Softer US CPI, downbeat Fed Minutes weigh on US Dollar, yields despite latest corrective bounce.
• Risk catalysts, Fed talks eyed for clear directions.

USD/JPY remains sidelined around 133.20 during sluggish trading hours of early Thursday morning in Europe. In doing so, the Yen pair traces a mild recovery in the US Treasury bond yields while also cheering new Bank of Japan (BoJ) Governor Kazuo Ueda’s defense to the ultra easy monetary policy.

Early in Asia, Bank of Japan (BoJ) Governor Kazuo Ueda tried to defend the Japanese central bank’s easy-money policy while speaking at the Group of Seven (G7) nations’ gathering in Washington. “BoJ will continue monetary easing until the price target is stable and sustainably achieved,” said BoJ’s Ueda while also adding that Japan's consumer inflation is currently around 3% but likely to slow ahead.

It should be noted that the US 10-year and two-year Treasury bond yields print mild gains around 3.41% and 3.98% respectively. That said, , the US 10-year Treasury bond yields snapped a three-day uptrend with mild losses to around 3.40% while the two-year counterpart also eased to 3.96% by marking the first daily negative in five.

Additionally, Japan’s recalling of the emergency evacuation order after North Korean missile testing also provide tailwind to the risk barometer pair.

Elsewhere, the odds of the US Federal Reserve’s (Fed) policy pivot increase after downbeat US inflation data and unimpressive FOMC Minutes, which in turn drowned US Dollar and Treasury bond yields the previous day, especially amid the recession woes.

On Wednesday, US Consumer Price Index (CPI) dropped to the lowest level since May 2021, to 5.0% YoY in March from 6.0% prior and versus 5.2% market forecasts. However, the annual Core CPI, namely the CPI ex Food & Energy, improved to 5.6% YoY during the said month while matching forecasts and surpassing 5.5% prior.

On the same line, the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting also challenged the Fed hawks by stating that the expectations for rate hikes were scaled back due to the turmoil in the banking sector. Furthermore, the latest comments from the Fed policymakers, including San Francisco Federal Reserve Bank President Mary Daly and Richmond Federal Reserve President Thomas Barkin, suggest easing inflation and challenges to the hawkish Fed, as well as for the US Dollar.

Amid these plays, S&P 500 Futures print mild gains despite downbeat Wall Street closing whereas Japan’s Nikkei 225 rise 0.60% intraday as we write.

Although a light calendar and mixed mood restrict USD/JPY moves of late, today’s US Producer Price Index (PPI) for March and Friday’s preliminary readings of the Michigan Consumer Sentiment Index for April can entertain the Yen pair traders.

Technical analysis

Repeated failures to cross the 200-day Exponential Moving Average (EMA), around 133.75 by the press time, teases USD/JPY bears to aim for a three-week-old support line, near 131.30 at the latetst.