USD/JPY fades bounce off 115.00 amid sluggish yields, focus on Russia, inflation

• USD/JPY licks its wounds after declining the most in a month the previous day.
• US Treasury yields struggle for clear direction, stock futures print mild gains.
• Chatters over Russian invasion of Ukraine, Fed’s rate-hike gain major attention amid light calendar.
• FOMC Minutes, Japan’s Q4 Preliminary GDP will be key data/events to watch for fresh impulse.

USD/JPY remains on the back foot around 115.40 during an initial hour of Tokyo open on Monday.

The yen pair dropped the most since mid-January on Friday as yields plunged on easing Fed-rate-hike concerns and rising fears over the Russian invasion of Ukraine. That said, the latest moves could be linked to the market’s inaction and a light calendar ahead of the key releases.

On Friday, US President Joe Biden raised concerns about an imminent military attack by Russia over Ukraine. Not only US President Biden but the UK and Eurozone leaders also flashed worrisome signals for the much-debated geopolitical event.

It’s worth noting, however, that Russian President Vladimir Putin termed any such claims as ‘provocative speculation’, per AFP News. However, market players seemed to not believe in Putin’s comments as Bloomberg said, “Standoff with Russia over Ukraine heads into most tense week yet.”

Elsewhere, Japan’s covid woes seem to ease with the latest 7-day backward moving average of infections being around 204,368 versus the all-time high of 228,847 flashed on February 03. This adds to Japan’s ability to ease entry barriers for non-residents. “Japan is considering easing the entry ban on nonresident foreigners to prevent the spread of the Omicron variant of the coronavirus in March, amid growing criticism from academic and business circles, a source familiar with the matter said Saturday,” per Kyodo News.

Furthermore, the CME FedWatch Tool suggests around 50-50 chances of 50 basis points (bps) of a Fed-rate-hike in March versus a 0.25% move. Previously, especially after the US Consumer Price Index (CPI) release, the market was almost certain of a higher boost to the rates. That said, the preliminary readings of the US Michigan Consumer Sentiment for February eased from 67.2 to 61.7 on Friday.

Additionally, news that the Bank of Japan (BOJ) opens Japanese Government Bond (JGB) buying window, to buy unlimited 10-yr bonds at 0.25% also favor USD/JPY prices to remain mildly bid around 115.50.

Amid these plays, the US 10-year Treasury yields lick their wounds around 1.95%, after shedding over 11 basis points (bps) the previous day. Further, the S&P 500 Futures print mild gains by the press time.

Looking forward, headlines concerning Russia and inflation may entertain USD/JPY traders with a light calendar on Monday. However, Tuesday’s Preliminary Q4 GDP and Wednesday’s FOMC Minutes will be important for the pair traders to watch for clear direction.

Technical analysis

Although double tops around 116.35 restrict the short-term upside of USD/JPY prices, the pair bears remain cautious until witnessing a clear downside break of the three-week-old support line, near 114.95 by the press time.