USD/JPY rebounds towards 124.00, tracks US dollar ahead of Fed minutes

• USD/JPY is attempting a bounce, finding support from firmer US Treasury yields.
• The pair failed to resist above 124.00 amid a pullback in the US dollar.
• All eyes remain on the Fed minutes, which may highlight the Fed/BOJ divergence.

USD/JPY is rebounding towards 124.00, as the ongoing rallying in the US Treasury yields helps find a floor near 123.60.

Over the last hours, the US dollar saw a sharp pullback from multi-month highs of 99.75 when compared with its major rivals. This could be attributed to a profit-taking slide ahead of the critical FOMC March meeting’s minutes.

However, the US Treasury yields keep rallying, as the Fed officials stepped up the hawkish rhetoric recently, calling for a bigger rate hike, as well as, the balance sheet run-off in the May meeting.

Meanwhile, the new Western sanctions against alleged Russian war crimes in Ukraine and the hawkish Fed’s expectations are weighing down on the market mood, keeping the pullback in the dollar short-lived.

On the other side, the Bank of Japan (BOJ) remains stuck with its ultra-loose monetary policy stance while desperately defending its yield curve target at 0.25%. This action by the BOJ has widened the monetary policy divergence between the Fed and the Japanese central bank, leaving the yen in the hands of the bears.

USD/JPY: Technical levels to consider