USD/JPY slightly bullish, unable to recover 123.00

• Japanese yen steady as US yields move sideways on Monday.
• USD/JPY consolidation, unable to recover 123.00.
• Dollar mixed across the board; DXY up for the third day in a row. 

The USD/JPY is rising modestly on Monday, supported by higher US yields and a mixed US dollar. The pair peaked at 122.94 and then pulled back toward the 122.70 area.

In the short-term. USD/JPY is moving sideways with a bullish bias, facing resistance below 123.00. On the flip side, immediate support emerges at 122.50 followed by the daily low at 122.25.

US yields bounced after the beginning of the American session hitting fresh daily highs. The 10-year yield stands at 2.42% and the 2-year at 2.45%. The DXY is up for the third consecutive day, gaining 0.30% at 98.85. Equity prices are mixed in Wall Street while crude oil rises more than 3%.

Regarding US economic data, Factory Orders declined 0.5% in February, in line with expectations. The key event of the week will be the FOMC minutes on Wednesday. The divergence in monetary policy expectations between the Bank of Japan and the Federal Reserve, with risk sentiment, remain the key drivers of price action in USD/JPY.

Analysts at BBH point out that for now, the Bank of Japan won the battle to maintain Yield Curve Control. “The 10-year yield is trading near 0.21%, below the 0.25% limit under YCC.  However, the struggle to contain JGB yields is by no means over, not when bond yields in the rest of the world continue to march higher.  While last week’s spike in USD/JPY was an overreaction to the BOJ’s YCC operations, the direction for this pair remains clear with central bank divergence particularly strong here. A break above 123.65 is needed to set up a test of the March 28 high near 125.10.”

Technical levels