USD/JPY bulls seek acceptance from 115.70 monthly hurdle amid sluggish yields

• USD/JPY fades bounce off intraday low, seesaws around one-month-old horizontal resistance.
• Bond yields struggle to keep recent rally as inflation-linked anxiety escalates, Fed’s Daly favor March rate hike.
• Covid conditions worsen in Japan, BOJ’s easy money policies doubted amid reflation fears.
• Fedspeak, risk catalyst may offer intermediate moves ahead of US CPI.

USD/JPY struggles to carry the previous day’s biggest daily jump as short-term key resistance challenge bulls around 114.50.

The yen pair jumped the most in over a week the previous day as Treasury yields rallied across the board. However, mixed comments from US Federal Reserve (Fed) officials and anxiety over inflation, not to forget trade/political fears, seem to challenge the USD/JPY bulls of late.

San Francisco Fed President Mary Daly favored the March rate hike in her latest speech. However, the Fed policymaker also said, “Fed can't be overly aggressive on rate increases.”

Following the speech, the US 10-year Treasury yields retreat from a three-year high while the bound coupons in Japan also eased. “The rising tide of worldwide yields has reached Japan, pushing 5-year and 10-year rates to the highest levels since 2016. The moves suggest that sooner or later the central bank will have to back up its message with actions instead of words,” Bloomberg said previously.

Also contributing to the gold’s upside momentum is the looming risk of a Russian invasion of Ukraine and the US-China trade tussles. On the same line are the latest comments from the Chinese Communist Party (CCP) that was quoted in the South China Morning Post (SCMP) as saying, “China should ‘support and guide’ the healthy development of capital, and prevent the ‘barbaric growth of capital.’”

Earlier in the day, US President’s Chief Medical Adviser Dr. Anthony Fauci said, per the Financial Times (FT), “The US is heading out of the ‘full-blown’ pandemic phase of Covid-19.”

At home, Kyodo News said, “Tokyo and 12 other prefectures currently under a COVID-19 quasi-state of emergency have requested an extension to the measure set to end this weekend, the prefectural governments said Tuesday.”

Global markets turn anxious after the latest risk-on mood as traders await Thursday’s US Consumer Price Index (CPI) data.

Read: Higher energy prices will make inflation spin out of control

Technical analysis

Sustained trading beyond the 12-day-old ascending trend line and 21-DMA, near 114.65 at the latest, joins bullish MACD signals to favor buyers around one-month-old horizontal resistance near 115.70.