USD/JPY bulls cross 135.00 as BoJ’s Ueda defends monetary policy inaction, yields rise

• USD/JPY picks up bids to portray three-day winning streak.
• Japan’s household spending drops the most since March 2022, real wages ease too.
• BoJ Governor Ueda said to defy any pre-set mind while setting monetary policy.
• Yields improve amid mixed US signals, focus on banking, US CPI.

USD/JPY takes the bids to refresh intraday high near 135.30, up for the third consecutive day, as Bank of Japan (BoJ) Governor Kazuo Ueda defends easy money policy as markets in Tokyo open for Tuesday. Adding strength to the risk-barometer pair could be the comments from Japan’s Finance Minister (FinMin) Shunichi Suzuki, as well as broadly firmer US Treasury bond yields and the US Dollar.

BoJ’s Ueda said, “Our scheduled review won't have any pre-set idea in mind on specific monetary policy move.” The policymaker also added that the BoJ will take necessary policy action at each meeting, with an eye on financial and price developments, even while conducting the review. On the other hand, Japan FinMin Suzuki confirmed that the nation’s financial system is stable.

Elsewhere, Japan’s Household Spending marked the biggest fall since March 2022 with -1.9% YoY figure for March, versus the expected +0.4% and prior +1.6%. Further, the nation’s Inflation Adjusted (Real) Wages for the said month also eased to -2.9% YoY during the said month compared to -2.4% market forecasts and -2.9% previous readings.

On the other hand, the US Dollar Index (DXY) extends the previous day’s rebound amid firmer yields and mixed signals surrounding inflation and banking conditions. That said, the benchmark US 10-year Treasury bond yields rose in the last three consecutive days to 3.51% at the latest whereas the US inflation expectations as per the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) data jumped to one-week high the previous day. Elsewhere, the Federal Reserve’s (Fed) quarterly bank loan survey showed tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms, as well as small firms, over the first quarter.

It’s worth noting that Chicago Federal Reserve Bank President Austan Goolsbee said, “It is too early to say what the next policy move will be,” while explaining that there were a lot of uncertainties regarding the impact of credit tightening on the economy. However, Reuters came out with news suggesting US Treasury Secretary Janet Yellen’s personal reaching out to business and financial leaders to explain the "catastrophic" impact a US default on its debt would have on the U.S. and global economies, two sources familiar with the matter said on Monday.

Amid these plays, markets remain divided but defend the latest US Dollar rebound ahead of the key Consumer Price Index (CPI) data for April, up for publishing on Wednesday.

Technical analysis

A clear rebound from the 21-DMA and a six-week-old ascending support line, respectively near 134.50 and 133.90, redirects USD/JPY buyers toward the 200-DMA resistance of around 137.00 by the press time.