USD/JPY stays defensive around 127.00 on softer USD, BOJ-linked chatters

• USD/JPY reverses early-day gains, prints three-day downtrend of late.
• Receding bets on Fed’s aggression weigh on USD but risk-on mood appears challenging the pair bears.
• BOJ’s Kuroda reiterates support for easy money policies, Japan PM Kishida seems hopeful of reaching inflation target.
• US bank holiday, light calendar restricted initial moves, risk catalysts, US NFP is the key moving forward.

USD/JPY not only reverses the day-start rally that probed a two-day downtrend but also renews the intraday low heading into Monday’s European session. That said, the yen pair seems to struggle with multiple mixed catalysts while recently easing to 127.00.

Among them, the market’s indecision and the US bank holiday restrict the pair’s latest moves while the broad US dollar weakness contrasts the risk-on mood to trouble the USD/JPY traders. Above all, the Bank of Japan (BOJ) Governor Haruhiko Kuroda’s readiness for powerful monetary easing keeps the pair buyers hopeful.

BOJ’s Kuroda recently mentioned that the central bank will continue powerful monetary easing to help the economy recover from a covid-induced slump. On the same line, Japanese Prime Minister Fumio Kishida said on Monday, that his government expects the Bank of Japan (BOJ) to strive to achieve the inflation target.

Elsewhere, softer yields and receding bets on the Fed’s aggressive rate hikes, mainly after the latest growth and inflation figures from the US, seem to weigh on the USD/JPY prices. Even so, risk-on mood and headlines from China, signaling a further drawdown on activity restrictions in China, help the USD/JPY pair buyers due to the pair’s risk-barometer status.

While portraying the mood, the S&P 500 Futures refresh a three-week high while the S&P 500 benchmark posted the biggest weekly gain in 18 months.

Moving on, USD/JPY traders seek clear directions from yields and risk catalysts, which in turn highlights Tuesday’s employment data for Japan and qualitative factors surrounding China, covid and Russia.

Technical analysis

Even if the 50-DMA defends USD/JPY buyers around 126.70, a downward sloping trend line from May 09, near 127.60, restricts the pair’s short-term upside.