USD/JPY renews intraday high above 121.00 on BOJ minutes, ignores softer yields

• USD/JPY bulls keep reins at six-year high, picks up bids of late.
• BOJ Minutes repeat policymakers’ readiness to ease if needed.
• Market sentiment remains sluggish with eyes on the key US data, Biden’s meeting with NATO allies from Europe.
• Yields retreat from three-year high, Japan’s Nikkei 225 drops 1.0% tracking Wall Street.

USD/JPY remains on the front foot around the highest levels since early 2016, picking up bids to refresh daily high around 121.20 as Tokyo opens for Thursday.

The risk barometer pair recently rose after the Bank of Japan (BOJ) policymakers flagged concerns over inflation but showed readiness to extend an easy-money policy if needed, per the Minutes of the latest BOJ meeting.

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The yen major refreshed multi-day high the previous day as the US Treasury yields rallied to a three-year top. However, the bond coupons’ pullback from the 2.417% level, down 1.5 basis points (bps) near 2.30% at the latest, failed to weigh on the USD/JPY prices. The reason could be linked to the market’s anxiety ahead of the key data/events.

Talking about the important ones, preliminary readings of the US PMIs for March and US President Joe Biden’s meeting with European counterparts from the North Atlantic Treaty Organization (NATO) will be the key. Also important will be the US Durable Goods Orders for February.

Forecasts suggest that the US Markit Manufacturing PMI may weaken to 56.3 from 57.3 previous readouts while the Services PMI seemed to have dropped to 56.0 from 56.5. Further, the US Durable Goods Orders growth for February is likely turned negative with -0.5% forecasts versus 1.6% prior.

Elsewhere, risk catalysts flash mostly negative signals as the UK and the US ready more help for Ukraine while Russia hands over a list of diplomats termed as ‘persona non grata’ to the US embassy. Also, US Senator John Cornyn recently said he met with US Treasury Secretary Janet Yellen to discuss Russian gold sanctions. The news becomes more worrisome ahead of Biden’s meeting with NATO friends. On the other hand, Russian President Vladimir Putin has said, “Russia will seek payment in roubles for gas sold to ‘unfriendly’ countries.”

On the positive side, news from the US Trade Representative’s (USTR) office surrounding the Sino-American trade pact seems to have helped the market sentiment. In the latest update, USTR mentioned that it will reinstate 352 expired product exclusions from US ‘Section 301’ tariffs on imported goods from China. These exclusions were expired in 2020.

Amid these plays, the S&P 500 Futures print mild gains but Japan’s Nikkei 225 dropped -1.26% intraday by the press time.

Moving on, USD/JPY may remain firmer ahead of the key catalysts as the market’s rush towards the US dollar is less likely to fade amid geopolitical fears.

Technical analysis

January 2016 top surrounding 121.70 seem to lure the USD/JPY buyers while the overbought RSI may test the pair’s upside afterward. Alternatively, pullback moves may aim for the year 2017 peak of 118.60.