USD/JPY eases to 146.00 as strong JGB yields flag hawkish BoJ concerns

• USD/JPY clings to mild losses while paring week-start recovery.
• 10-year, 30-year Japanese Government Bond (JGB) yields jump to the highest since 2014.
• US 10-year Treasury bond coupons print 15-year high, market sentiment sours amid growth, China woes.
• Yen bears need validation from US/Japan data, central bankers to keep the reins.

USD/JPY consolidates the week-start gains by printing mild losses around 146.00 heading into Tuesday’s European session. That said, the Yen pair justifies the market’s fears of the hawkish Bank of Japan (BoJ) monetary policy, as well as the downbeat sentiment.

An improvement in the late Japan growth and inflation numbers propel the 10-year and 30-year Japanese Government Bond  (JGB) yields to the highest level since 2014, close to 0.66% and 1.66% respectively. With this, the top-tier bond coupons increase the market’s bets on the BoJ’s exit from the ultra-easy monetary policy, especially after the central bank’s latest tweak to the Yield Curve Control (YCC) policy.

On the other hand, the US 10-year Treasury bond yields refreshed the highest level since November 2007 earlier in the day to 4.36% before easing to 4.34% at the latest.

It’s worth noting that the mostly upbeat US data and looming fears about the US banking industry, especially after the recent credit rating downgrade from Moody’s and the S&P Global, underpin the market’s cautious mood and the bond coupons.

Furthermore, China’s efforts to defend the post-COVID economic recovery, via a slew of stimulus measures, fail to impress market optimists and exert downside pressure on the risk profile, which in turn allows the Yen (JPY) to cheer the traditional haven status.

Elsewhere, the Federal Reserve Bank of New York unveiled its SCE Labor Market Survey results late Monday that suggested record wage expectations and could have contributed to the latest risk-off mood, as well as firmer bond yields. “The Lowest wage respondents would be willing to accept for a new job jumped to a record high of $78,645 in July, up from $72.873 a year ago,” said the findings.

Amid these plays, Japan’s Nikkei 225 rises 0.80% but the S&P500 Futures print mild losses to reverse the previous recovery from the a nine-week low.

Moving on, US housing numbers, Japan inflation and the mid-tier policymakers’ speeches will be crucial for the USD/JPY traders. Above all, Friday’s Fed Chair Jerome Powell’s speech at the Jackson Symposium appears the key for clear directions.

Technical analysis

USD/JPY stays on the bull’s radar unless providing a daily close beneath June’s peak of around 145.00.