USD/JPY renews six year high near 120.00 as US T-bond yields refresh multi-day top

• USD/JPY remains firmer around the highest levels since 2016, briefly pieced 120.00 of late.
• Yields rally as IMF’s Rhee joins hawkish Fedspeak, BOJ’s Kuroda and Ukraine-Russia crisis.
• Comments from Fed policymakers, Ukraine updates will be crucial for near-term directions.

Firmer yields and risk-off mood propels USD/JPY to pierce the 120.00 psychological magnet while refreshing a six-year high during Tuesday’s Asian session. That said, the quote eases to 119.85 by the press time.

That said, US 10-year Treasury yields rise to a fresh high since May 2019 while taking the bids near 2.328% level.

It’s worth noting that the benchmark US bond coupon rallied the most in three weeks the previous day after Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

Recently adding strength to the bond selling are the statements from the International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year. Additionally, the Bank of Japan (BOJ) Governor shrugged off the market’s expectations of monetary policy tightening and offered additional strength to the USD/JPY prices.

On a different page, the Ukraine-Russia crisis worsens as Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Against this backdrop, S&P 500 Futures drops 0.30% but Japan’s Nikkei 225 rose 1.6% even as Japan’s Chief Cabinet Secretary Hirokazu Matsuno turned down the hopes of a multi-million yen stimulus earlier in the day.

Given the risk-aversion and firmer yields, USD/JPY is likely to witness firmer upside. However, comments from the Fed policymakers and updates from the Ukraine-Russia front are important to watch for fresh impulse.

Technical analysis

USD/JPY remain on the way to challenge late 2019 peak surrounding 121.70 unless dropping back below an upward sloping resistance-turned-support line, near 118.00 by the press time,