USD/JPY traces yields to retreat towards 134.50, wage growth, recession woes in focus

• USD/JPY snaps two-day uptrend as it eases from weekly top.
• Reuters poll suggests Japanese firms increasing wages amid a labor shortage.
• Yield eased after Fed Minutes but firmer US data keeps buyers hopeful.
• Second-tier US data could entertain traders but risk catalysts are the key.

USD/JPY takes offers to renew intraday low near 134.90 as it consolidates weekly gains on Thursday’s Tokyo open. The yen pair’s latest weakness could be linked to the chatters surrounding the Japan-China ties and employment conditions in the Asian major. Also favoring the bears could be the latest Fed Minutes. However, fears of recession favor the pair bulls amid a sluggish session.

Earlier in the Asian session, Japan’s local media Jiji mentioned that Japan's National Security advisor Takeo Akiba and China's Foreign Minister Yang Jiechi agreed to continue talks in order to establish a positive and stable relationship.

Elsewhere, More large Japanese companies are now raising wages to attract workers and cope with chronic staff shortages, a monthly Reuters poll showed on Thursday, a tentative sign Japan Inc may be slowly addressing pay that has been flat for decades.

It should be noted that the US 10-year Treasury yields retreat from the weekly top surrounding 2.90% to 2.89% by the press time. The benchmark bond coupons ignored downbeat Federal Open Market Committee (FOMC) meeting Minutes, while also ignoring risk-positive news from China Securities. The Fed Minutes stated that the policymakers strongly supported the 75 bps rate increase in August while seeing a slowing pace of hikes at some point. The Minutes also signaled that Fed officials saw the hazard the Fed could tighten more than necessary.

On the other hand, “China may issue 1.5 trillion yuan in additional debt as part of an investment push,” mentioned China Securities news.

Amid these plays, the S&P 500 Futures drop 0.25% while tracking the downbeat performance of Wall Street whereas Japan’s Nikkei 225 prints near 1.0% daily loss at the latest.

Looking forward, the weekly prints of the US Initial Jobless Claims and Philadelphia Fed Manufacturing Survey for August could entertain the pair traders amid a lack of major data/events.

Technical analysis

USD/JPY bulls need to cross the 50-DMA hurdle surrounding 135.40 to tighten the grip. Until then, the risk of witnessing a pullback towards the 21-DMA support around 134.50 can’t be ruled out.