USD/JPY lacks bullish conviction around 146.50 YTD top even as yields approach worrisome peak

• USD/JPY seesaws at YTD top amid fears of Japan intervention, mixed data from Tokyo.
• Yields approach 2022 peak that triggered global recession woes.
• Hawkish Fed bets, economic jitters weigh on sentiment, underpinning US Dollar strength.
• Risk catalysts, mid-tier US data eyed for clear directions.

USD/JPY refreshes the Year-To-Date (YTD) high to 146.55 but lacks follow-through amid fears of the Japanese policymakers’ market intervention to defend the Yen. That said, broad risk aversion and hawkish Fed concerns underpin the major currency pair’s run-up early Thursday.

Market sentiment sours as traders fear hawkish Fed bias amid global economic woes. Also challenging the sentiment could be the geopolitical/economic woes emanating from China, as well as the recently mixed US data.

The latest Fed meeting minutes highlighted the policymakers’ discussion on the inflation pressure, despite marking a division on the rate hike decision. That said, the Minutes also conveyed that most policymakers preferred supporting the battle again the ‘sticky’ inflation. While helping the markets to justify hawkish Fed bias, US Industrial Production traced upbeat Retail Sales figures.

Additionally, a slump in China’s housing prices marked the first fall of the year in June and joins the fears about another bond market crisis in the Dragon Nation, as the biggest private realtor Country Garden struggles to pay bond payments.

To portray the mood, S&P500 Futures dropped to the lowest level in five weeks, indecisive around the multi-day bottom surrounding 4,415-20 by the press time. In doing so, the US stock futures trace losses made by the Wall Street benchmark.

It’s worth noting that, the US 10-year Treasury bond yields rise to the highest level since October 2022, around 4.298% at the latest. It should be noted that such a high level of bond coupons triggered fears of economic slowdown and drowned the riskier assets, while also underpinning the US Dollar, during late 2022.

On a different page, the mostly firmer US data and mixed Japan numbers also test the USD/JPY pair of late. Earlier in the day, Japan marked the mixed prints of Merchandise Trade Balance for July and upbeat Machinery Orders for June, which in turn defends the Bank of Japan (BoJ) officials’ support for the ultra-easy monetary policy.

Moving forward, the risk catalysts will be the key to determining the near-term AUD/JPY moves amid a light calendar elsewhere.

Technical analysis

Overbought RSI joins ascending resistance line from July 21, close to 146.55 by the press time, to challenge USD/JPY buyers. The pullback moves, however, remain elusive beyond June’s peak of 145.05.