USD/JPY grinds higher towards 114.00 as yields recover on coronavirus talks

• USD/JPY extends Monday’s rebound from three-week low, refreshing intraday low at the latest.
• Yields recovery as global leaders portray cautious optimism, shrugs off Friday’s haphazard move.
• Mixed data from Japan versus firmer US numbers and Fedspeak underpin bullish bias.
• US CB Consumer Confidence, Testimonies of Fed’s Powell and US Treasury Secretary Yellen will be crucial to watch.

USD/JPY stays on the front foot for the second consecutive day, up 0.16% intraday around 113.85 as Tokyo opens for Tuesday.

The yen pair cheers recovery in the US Treasury yields and easing fears of the South African covid variant to stretch the previous day’s bounce off the early November lows, consolidating Friday’s heavy losses. Adding to the upside could be the mixed data from Japan, versus comparatively firmer US economics. However, the bulls aren’t sure of further advances as mixed concerns over the Fed’s next move and anxiety ahead of the week’s key events probe the quote’s latest advances.

Japan’s Preliminary Industrial Production for October eased below 1.8% market consensus but recovered from -5.4% prior to +1.1% MoM level. On the contrary, the Unemployment Rate eased to 2.7% from 2.8% forecast and prior whereas the Jobs/Applicants ratio dropped below 1.17 expectations and 1.16 previous readouts to 1.15 in October.

Alternatively, the US Pending Home Sales jumped 7.5% MoM in October versus 1.0% forecast and -2.45 prior reading.

It’s worth noting that the emergency meeting of the Group of Seven (G7) leaders showed the world leaders’ readiness to combat the virus woes in a joint effort but shared no major details. “In a joint statement released after the online gathering, convened under Britain's current presidency of the group, the G-7 ministers ‘recognized the strategic relevance of ensuring access to vaccines,’ following through on their donation commitments and ‘tackling vaccine misinformation, as well as supporting research and development,’” per Kyodo News.

It’s worth noting that Japan’s banning of international flights from South Africa and surrounding countries join US President Joe Biden’s cautious optimism to favor the USD/JPY buyers. On the same line were comments from Fed Chair Jerome Powell who accepts covid challenges for inflation and jobs report but backs inflation pressure. Further, US Treasury Secretary Janet Yellen also placates market pessimism while pushing Congress to overcome the US debt limit deadlock, as well as highlighting the strength of the US economy.

Additionally, news that the US global military posture highlighted the need to work with allies and partners to beef up deterrence against potential Chinese aggression and North Korean threats, per Kyodo News, adds to the US dollar’s safe-haven demand and favor USD/JPY buyers.

Amid these plays, US 10-year Treasury yields recover above 1.51% whereas the S&P 500 Futures and Japan’s Nikkei post mild gains by the press time.

Looking forward, US CB Consumer Confidence for November will precede Testimonies from Fed’s Powell and Treasury’s Yellen to direct short-term USD/JPY moves. However, covid updates will be the key ahead of Friday’s US jobs report.

Technical analysis

A successful recovery from the 50-DMA, around 113.25 by the press time, keeps USD/JPY buyers hopeful to overcome the immediate hurdle, namely the 21-DMA level near 114.10. Though, multiple stops around the 115.00 threshold will challenge the pair’s upside afterward.