USD/JPY picks up bids above 134.00 as BoJ vs. Fed battle intensifies amid strong yields

• USD/JPY reverses the previous day’s pullback from six-week high.
• Upbeat US data, risk-aversion propels the Yen pair near the multi-day top amid light calendar.
• Fed policymakers appear hawkish but BoJ talks defend current policy.

USD/JPY regains upside momentum near the 1.5-month high, following a retreat from the multi-day top, as the Yen pair renews its intraday high near 134.20 as Tokyo opens for Friday. In doing so, the Yen pair justifies the firmer US Treasury bond yields and the hawkish Fed concerns amid upbeat US data and cautious comments from the Bank of Japan (BoJ) Officials.

That said, the US 10-year Treasury bond yields rises to a fresh high since December 30, 2022, up 3.5 basis points to 3.87% by the press time. On the same line, two-year US Treasury bond yields print mild gains to end Thursday around 4.64%, the highest levels since November 2022, making rounds 4.65% at the latest.

Underlying the strong Treasury bond yields could be the upbeat US data and hawkish Federal Reserve talks.

Recently, Cleveland Fed President Loretta Mester teased the recession woes while repeating the previous defense of the highest rates. Before that, St. Louis Federal Reserve's James Bullard said, “Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low.”

On the other hand, Japan's Finance Minister (FinMin) Shun’ichi Suzuki tried to sell the idea that the latest Bank of Japan (BoJ) nominations are perfect to defend the central bank’s latest role. The same hints at a prolonged easy money policy and weigh on the Japanese Yen (JPY). “Nomination of BoJ nominees as result of consideration towards structural wage hikes and sustainable, stable achievement of the inflation target,” said Japan’s FinMin Suzuki.

It should be noted that the US Producer Price Index (PPI) for January gained major attention from the USD/JPY buyers as it jumped the most since June with 0.7% MoM figure. Also positive for the pair was the improvement in the US Initial Jobless Claims for the week ended on February 10, 194K versus 200K expected and 195K prior. Alternatively, a slump in the Housing Starts for January and the Philadelphia Fed Manufacturing Survey for February seemed to have gained a little attention.

Elsewhere, the fresh US-China tension and Russia’s refrain from stepping back when it comes to attacking Ukraine also weigh on the risk appetite and the EUR/USD prices, due to the US Dollar’s safe-haven demand. That said, US President Joe Biden fired shots at his Chinese counterpart while conveying the expectations for a talk with the Chinese leader, during an interview with NBC News. “I think the last thing that Xi wants is to fundamentally rip the relationship with the United States and with me," said US President Biden per Reuters.

Amid these plays, Wall Street closed negative and the S&P 500 Futures dropped 0.30% intraday by the press time. 

Looking forward, USD/JPY buyers are likely to keep the reins and may propel the price towards refreshing the multi-day high above 134.00 amid a lack of major data/events on the calendar, other than what’s already mentioned above.

Technical analysis

A successful daily closing beyond the 200-day Exponential Moving Average (EMA), around 133.80 by the press time, directs USD/JPY toward the 100-day EMA resistance surrounding 134.75-80.