USD/JPY crosses 129.00 as yields recover ahead of US Retail Sales, Fed’s Powell

• USD/JPY picks up bids to reverse early Asian session losses.
• Covid updates from China recently favored market sentiment, Japan’s Suzuki pushes for budget surplus.
• Softer US data, Fedspeak challenge buyers amid indecisive markets.
• US Retail Sales, Fed Chair Powell’s speech to determine near-term moves, risk catalysts are important too.

USD/JPY refreshes intraday high to 129.25 as upbeat sentiment joins firmer Treasury yields to please buyers after a lackluster start to the week.

That said, the quote’s latest run-up could be linked to the positive headlines from China, as well as in anticipation of US Retail Sales for April and a speech from the Fed Chairman Jerome Powell. Furthermore, comments from Japan’s Finance Minister Shunichi Suzuki.

The Japanese policymaker recently said, “In FY 2025/26, the primary budget surplus aim must be met.”

Elsewhere, Shanghai conveyed plans to end the covid-linked lockdown after the third consecutive day of zero coronavirus cases outside the quarantine area, which in turn favors the market sentiment and propels the USD/JPY prices.

It should be noted that the US Treasury yields dropped the previous day, with the US Dollar Index (DXY), as a fall in the NY Empire State Manufacturing Index for May, expected +15.5 versus -11.6 actual, as well as comments from New York Fed President John Williams. Fed’s Williams backed Chairman Jerome Powell’s 50 basis points (bps) rate hike idea by highlighting inflation as the main issue. It should be noted that the news suggesting the US extend covid public health emergency beyond July also allowed the US dollar to pare some gains. That said, the US Dollar Index (DXY) eased further from its 20-year top, printed a two-day downtrend as sellers approach 104.00 by the end of Monday’s North American session. The softer yields and hopes of not-so-heavy rate hikes helped the Wall Street benchmarks, even as US equities printed mixed closing on Monday.

Amid these plays, the US 10-year Treasury yields added 1.8 basis points (bps) to 2.897% by the press time whereas the S&P 500 Futures rose 0.20% at the latest.

Moving on, the US Retail Sales for April, expected at 0.7% versus 0.5% prior, will offer initial directions to the USD/JPY prices ahead of Fed Chair Powell’s speech at the Wall Street Journal’s (WSJ) event. Traders will be more interested in hearing how Fed’s Powell defends his 50-bps rate hike bias amid surging inflation fears. Should Powell manages to do that, the USD/JPY may witness fresh downside pressure.

Technical analysis

A convergence of the 10-DMA and weekly resistance line, around 129.65-70, appears a tough nut to crack for short-term USD/JPY buyers. However, fresh selling is likely to wait unless witnessing a clear break below the three-week-old support line, near 128.50 by the press time.