USDJPY aims to regain 146.00 amid firmer yields, US midterm election jitters

• USDJPY rebounds from a two-week low to print the first positive day in four.
• Treasury yields reverse the previous day’s losses as fears of US government gridlock join recession woes, China covid concerns.
• Japan’s current account surplus slumps in the H1 fiscal year but improved in September.
• US inflation, updates from mid-term elections will be crucial for near-term directions.

USDJPY prints a mild recovery from a two-week low around 145.70-80 during early Wednesday morning in Asia. In doing so, the Yen pair snaps a three-day downtrend amid the market’s cautious mood.

That said, sentiment fades the previous optimism as the latest updates from the US mid-term elections suggest the US government gridlock. With this, the fears of higher rates also gain attention amid the Republican push for increasing the debt ceiling.

Elsewhere, the worsening coronavirus conditions in China also contribute to the latest risk-aversion, as well as to the USDJPY prices at a distance. China reports the highest levels of new COVID cases in six months, with the latest addition of 8,335 for November 08, while marking a fresh virus-led lockdown in Guangzhou’s second district.

It should be noted that Japan reported a notable monthly Current Account surplus for September but failed to ignore the heaviest decline in the surprise when considered for the first half (H1) of the current fiscal year (FY) since 2008. Additionally, talks of Bank of Japan’s (BOJ) meddling and the recently softer US data joined mixed concerns at the Fed to escalate the US Treasury yields and the USDJPY prices of late.

Amid these plays, the US 10-year Treasury yields regain upside momentum past 4.14% while the two-year counterpart also print mild gains near 4.66% level. It should be noted that the US stock future print mild losses while the Asia-Pacific equities closed in the red despite Wall Street’s three-day uptrend.

Moving on, political and covid updates may entertain USDJPY traders ahead of Thursday’s US Consumer Price Index (CPI) for October.

Technical analysis

The 50-DMA defends USDJPY buyers around 145.50 but the recovery needs validation from a three-week-old resistance line near 147.45.