USD/JPY defends 115.00 as yields rebound, IMF signals weaker yen

• USD/JPY holds onto intraday gains around two-week top.
• Yields rebound, S&P 500 Futures print mild gains as markets digest Fed moves.
• IMF signals Fed tightening will exert downside pressure on yen, pushes BOJ for more easy money policies.
• Tokyo CPI eases in January, US Core PCE Inflation data eyed.

USD/JPY grinds higher around a fortnight high, taking rounds to the intraday top near 115.40 during the initial hours of Tokyo open on Friday.

In doing so, the yen pair rises for the third consecutive day amid a rebound in the US Treasury yields, as well as the International Monetary Fund’s (IMF) push for easy Bank of Japan (BOJ) policies.

It’s worth noting that Tokyo Consumer Price Index (CPI) for January eased to 0.5% versus 0.6% expected while the Tokyo CPI ex Food, Energy dropped below -0.3% forecast to -0.7% YoY.

Early Friday in Asia, IMF’s Deputy Director of the Asia and Pacific Department Odd Per Brekk joined IMF Japan Chief Ranil Salgado to hint at the further downside pressure on the yen, as well as suggest accommodative monetary policy to the Bank of Japan. The executives also highlighted a bearish bias for the Japanese yen due to the Fed’s latest hawkish stand.

Read: IMF urges BOJ to consider targeting shorter-term yields

That said, the pair’s recent upside also takes clues from the firmer US Treasury yields, up to one basis point (bp) to 1.81% by the press time.

The US bond yields eased after the US Federal Reserve (Fed) indirectly confirmed the March rate hike and cited room for more lift-offs. However, the bond buyers were recently stopped by the upbeat US data.

During the previous day, Advance Q4 US GDP rose 6.9% annualized versus 5.5% market consensus and 2.3% prior. On the same line was the US Initial Jobless Claims for the week ended in January 21that came in 206K compared to 260K expected and 290K previous. It should be noted, however, that the US Durable Goods Orders for December dropped by -0.9% for December, below -0.5% market consensus.

In addition to the US data and IMF comments, fears of Russia-Ukraine tension also underpin the US Treasury yields and favor USD/JPY buyers.

That said, the pair bulls may now await the US Core PCE Price Index figures for December as they’re considered the Fed’s preferred version of inflation. Markets expect a 4.8% YoY figure versus 4.7% prior.

Read: US PCE Inflation Preview: Dollar rally has more legs to run

Technical analysis

A clear upside break of November 2021 high of 115.52 becomes necessary for the USD/JPY bulls to aim for the last month’s peak surrounding 116.35. In absence of this, the quote may witness a pullback towards the 21-DMA level near 114.85.