USD/JPY probes three-day downtrend above 113.00 on sluggish yields

• USD/JPY struggles for a clear direction around monthly low.
• US Treasury yields consolidate recent gains, S&P 500 Futures print mild losses.
• Japan’s stimulus need pushes for new debt issuance, real wages snap two-month rebound.
• Fed’s Powell, risk catalysts remain on the driving seat, tapering tantrums eyed as well.

USD/JPY refreshes intraday low to 113.20, down 0.03% on a day following a three-day downtrend as Tokyo opens for Tuesday’s trading. The risk barometer pair portrays a cautious mood in the market amid a sluggish morning in Asia with fewer catalysts.

Even so, chatters that Japan’s likely stimulus needs more issuance of debt and the first negative prints of the real wages in three months to seem to weigh on the quote. “Japan's real wages declined in September for the first time in three months as inflation picked up faster than growth in nominal pay, the government said, a sign of global cost-push inflation starting to affect Japanese households,” said Reuters. On the other hand, Kyodo News mentioned, “Japan is considering an economic stimulus package worth more than 30 trillion yen ($265 billion) aimed at easing the pain from the COVID-19 pandemic, a plan that would require issuing new debt.”

It’s worth noting that Fed tapering tantrums escalate following Friday’s upbeat US jobs report and weigh on the market sentiment, also the USD/JPY prices of late. Additionally challenging the risk appetite is the anxiety over the Fed reshuffle and firmer US inflation expectations.

Further, Japan’s Current Account balance shrank below ¥1060B forecast to ¥1033.7B in September and weighed on the USD/JPY prices as well.

That said, S&P 500 Futures drop 0.15% by the press time despite Wall Street’s mildly positive closing. Further, the US 10-year Treasury yields fade the previous day’s rebound while declining back to 1.49% at the latest.

Looking forward, USD/JPY traders will pay close attention to the Fed tapering tantrums and US stimulus headlines for intermediate clues ahead of Fed Chair Jerome Powell’s speech. Should the Fed Boss repeat his cautiously hawkish speech, the USD/JPY may drop further.

Technical analysis

The previous resistance line from early August challenges the latest pullback moves around 113.00. On the contrary, recovery moves remain doubtful until staying below 114.00.