USD/JPY stays firmer above 115.00 as yields extend latest rebound, Ukraine fears stretch

• USD/JPY picks up bids to refresh intraday high, holds on to recovery moves from eight-day low.
• Yields keep rebound from two-week low, stocks remain on the back foot.
• EU, UK resists banning oil imports, Ukraine-Russia talks dwindle but human evacuation restarts.
• Japan Trade Balance, Current Account flashed downbeat figures for January.

USD/JPY prints mild gains around 115.30-35 while extending the previous day’s rebound to Tuesday’s Tokyo open.

The yen pair’s recent recovery could be linked to firmer US Treasury yields and escalating inflation fears due to the Russian invasion of Ukraine. Also favoring the USD/JPY buyers could be the latest downbeat data from Japan.

Japan’s Current Account n.s.a for January dropped to ¥-1188.7B versus ¥-880.2B forecasts whereas Trade Balance on the BOP basis for the said month also portrayed a higher deficit of ¥-1604.3B compared to ¥-318.7B prior.

That said, the US 10-year Treasury yields extend the previous day’s rebound from two-month to 1.77% up 2.5 basis points at the latest. However, Japan’s Nikkei 225 drops more than 1.0% by the press time whereas the S&P 500 Futures decline 0.30% at the latest.

Elsewhere, headlines from Reuters indicate no major progress in the peace talks between Ukraine and Russia even as the human corridor is up for a restart. “Ukrainian officials said a Russian airstrike hit a bread factory in northern Ukraine on Monday, killing at least 13 civilians, while talks between Kyiv and Moscow made little progress towards easing the conflict,” said the news.

It should be noted, however, that the UK and the EU’s resistance to fully ban the oil imports from Russia, as widely pushed by the US, joins the World Bank’s (WB) humanitarian aid to Kyiv to ease the previous risk-off mood.

Even so, Moscow is far from stepping back, which in turn challenges the global supply chain and propels inflation fears. As a result, odds of the Fed’s 0.50% rate-hike escalate of late that might have triggered the latest recovery of the US Treasury yields.

Hence, geopolitical headlines and supply crunch chatters may keep USD/JPY on the front foot while Thursday’s US Consumer Price Index (CPI) will be important data to watch moving forward.

Technical analysis

USD/JPY bulls aim for the monthly resistance line near mid-115.00s but any further upside needs validation from Thursday’s top of 115.80. On the contrary, bears remain hopeful until breaking the 100-DMA level surrounding 114.50.