USD/JPY ignores yields to slip beneath 132.00 as Japan’s real wages drop at a slower pace, US NFP eyed

• USD/JPY takes offers to refresh intraday low, reverses the previous day’s corrective bounce.
• Japan’s Inflation-adjusted real wages drops for 11th month in February but at a slower pace.
• Benchmark Treasury bond yields consolidates weekly losses amid Good Friday holiday in major markets.
• Recession woes, downbeat US data favor Yen bears ahead of top-tier US employment statistics.

USD/JPY renews its intraday low near 131.60 as it justifies the upbeat Japan data amid sluggish markets due to the Good Friday holiday at major bourses. That said, the Yen pair remains on the way to posting weekly losses with the latest fall, especially amid increasing hawkish bias for the Bank of Japan (BoJ).

The hawkish bias for the BoJ intensifies amid upbeat Japanese data, as well as comments from the Japanese Finance Minister (FinMin) Sunichi Suzuki.

“Inflation-adjusted real wages, a gauge of households' purchasing power, dropped by 2.6% in February from a year earlier, following a 4.1% fall in January that marked the fastest decline in nearly nine years,” per Reuters. It’s worth observing that Japan’s Overall Household Spending and Labor Cash Earnings also improved in February and favor the odds of the BoJ’s exit from the ultra-easy monetary policy.

It should be noted that Japan’s FinMin Suzuki showed hopes of witnessing suitable policy and hence raise fears of hawkish stunts from the BoJ officials, especially amid Haruhiko Kuroda’s departure.

Elsewhere, US Treasury bond yields pare weekly losses amid mixed concerns about the US recession and downbeat US data. With this, the US 10-year and two-year Treasury bond yields also stay pressured, despite the latest consolidation around 3.30% and 3.83% in that order.

Further, “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction,” said Reuters.

Above all, the divergence between the upbeat Japan data and disappointing US statistics keeps the USD/JPY pair on the bear’s table. However, the Yen pair’s further downside hinges on how well the US employment numbers can push back the recession woes. Forecasts suggest the headline Nonfarm Payrolls (NFP) be 240K, down from 311K prior, as well as estimating no change in the Unemployment Rate of 3.6%.

Technical analysis

Although the 50-DMA restricts immediate USD/JPY upside to around 133.15, USD/JPY bears need validation from an upward-sloping support line from mid-January, close to 131.30 by the press time.