USD/JPY stays below 136.00 on downbeat yields, shooting on former Japanese Prime Minister

• USD/JPY prints the first daily loss of the week, near intraday low of late.
• Japan’s ex-PM got wounded in the gun-shot from behind, yields portray sour sentiment.
• Mixed data, doubts over China’s stimulus add to the risk-aversion and weigh on the pair.
• US NFP, risk catalysts are important for fresh impulse.

USD/JPY rebounds from intraday low surrounding 135.30 but remains pressured around 135.70 as it snaps the four-day uptrend during early Friday in Europe.

The yen pair’s losses could be linked to the multiple catalysts boosting the risk-off mood at home and aboard. Among them, shooting the ex-Prime Minister Shinzo Abe ahead of the elections appears to gain major attention. On the same line could be the market’s anxiety ahead of the key US jobs report for June and doubts over China’s ability to tame economic woes with heavy stimulus.

“Japan's former Prime Minister Shinzo Abe is showing no vital signs,” per the latest update on the Japanese issue from Reuters.

Elsewhere, “A market indicator measuring how investors are positioned held at "extremely bearish" levels for a fourth consecutive week. Outflows from European equity funds extended into its 21^st week, while emerging market debt has now seen outflows for the past 13 weeks,” said Bank of America (BofA) per Reuters.

On a different page, news that China is ready for $220 billion of stimulus with unprecedented bond sales, per Bloomberg, previously propelled the market sentiment before the doubts over the heavy stimulus joined the covid woes to recall bears. Reuters mentioned the local government's lack of readiness to push more stimulus, mainly due to a limit at home, to mark the odds of failures of such a huge stimulus from the dragon nation.

Amid these plays, the US 10-year Treasury yields drop two basis points (bps) to 2.99% while the US 2-year bond coupon stays around 3.02%, keeping the inverted curve that signaled recession risks earlier in the week. It should be noted that the US stock futures are also mildly offered even as the Wall Street benchmarks cheered mixed US data to print gains.

That said, US Initial Jobless Claims rose by 4,000 to 235,000 in the week ending July 2, versus 230,000 expected. With this, the 4-week moving average number was 232,500, up 750 from the previous week's average. Further, the US goods and services deficit narrowed by $1.1 billion to $85.5 billion in May, marking the smallest monthly deficit in 2022.

Moving on, USD/JPY traders should pay attention to the risk catalysts ahead of the US employment data for clear directions. Forecasts suggest the headline US Nonfarm Payrolls (NFP) is expected to post the smallest monthly increase in jobs since April last year, by easing to 268K from 390K for June while the Unemployment Rate is likely to stay unchanged at 3.6% for the said month.

Technical analysis

USD/JPY seesaws inside a fortnight-old symmetrical triangle between 135.95 and 135.10.