USD/JPY pierces 115.00 on firmer yields ahead of US NFP data

• USD/JPY extends previous day’s gains to consolidate weekly losses, refreshes intraday high of late.
• Japan FinMin Suzuki cites country’s severe fiscal position, Tokyo tightens activity restrictions as covid infections refresh record top.
• Hawkish central banks propelled US government bond yields ahead of the key jobs report.

USD/JPY takes the bids to refresh daily high around 115.05 while paring the weekly losses as Tokyo opens for Friday’s trading.

In doing so, the yen pair takes clues from the US Treasury yields and downbeat economic, as well as covid, conditions, at home. That said, the quote rose the most in a week the previous day after the key central banks announced hawkish bias amid inflation fears.

Recently, Japan’s Finance Minister (FinMin) Shunichi Suzuki crossed wires while saying, “Japan's underlying fiscal position has become severe.” The policymaker also mentioned that he is not considering reviewing future sales tax rates at present.

On a different page, Tokyo is under immense pressure to announce a coronavirus-led emergency as Japan, unfortunately, registered above 1,00,000 daily infections for the first time. “Tokyo unveiled on Thursday a set of new benchmarks in considering requesting a COVID-19 state of emergency, such as if the rate of hospital bed occupancy secured for patients with serious symptoms has reached a threshold of 30 to 40 percent,” said Kyodo news.

On Thursday, the BOE raised benchmark interest rates by 0.25% whereas the ECB refrained from rejecting sooner rate hikes and rather signaled a major policy change brewing, without giving many details though. The central banks’ actions propel the US Treasury yields the most in a week, also drowning the equities. It’s worth observing that the US 10-year Treasury yields rise 1.5 basis points (bps) t o1.84% at the latest whereas the S&P 500 Futures rise 1.0% despite Wall Street’s losses.

Other than the central banks, rising geopolitical tensions over Russia-Ukraine also propel US Treasury yields and the USD/JPY prices. Kyodo News recently reported that Japan mulls sending gas to Europe amid Ukraine tensions.

Talking about data, US ISM Services PMI for January and Q4 Nonfarm Productivity came in strong but Factory Orders for December and Q4 Unit Labor Costs weakened, which in turn kept the trades on their toe ahead of the key US Nonfarm Payrolls (NFP) for January.

Looking forward, USD/JPY traders will keep their eyes on the US employment details for fresh impulse.

Read: Nonfarm Payrolls Preview: Win-win-win for the dollar? Low expectations, weak greenback point higher

Technical analysis

A successful bounce off the 50-DMA level hints at the USD/JPY upside towards the monthly resistance line near 115.55.