USD/JPY prints mild gains above 134.00 as sour sentiment, Fed concerns joins firmer yields

• USD/JPY picks up bids to refresh intraday high, reverses the pullback from nine-week top.
• Yields rally to two-month high as upbeat US data joins firmer Fed speak.
• Geopolitical concerns about China, Russia and North Korea recently weigh on sentiment.
• Off in the US, Canada restrict immediate moves amid a light calendar.

USD/JPY refreshes intraday high near the mid-134.00s as it picks up bids to reverse the previous day’s pullback from a multi-day high during early Monday. In doing so, the Yen pair portrays the broad US Dollar strength amid mildly downbeat sentiment and the holidays in the US and Canada.

That said, geopolitical concerns about China, North Korea and Russia have recently weighed on the market sentiment, even if the light calendar and absence of US/Canadian traders restrict the momentum.

During the weekend, North Korea fired two ballistic missiles toward Japan and renewed the fears that the hermit kingdom is up to something serious that can endanger the global economy, mainly due to the nature of the missiles fired as they both were termed as tactical nuclear attack weapons.

On the same line, the latest meeting between US Secretary of State Antony Blinken and China's top diplomat Wang Yi seemed to have failed in restoring the US-China ties. The reason could be linked to a Chinese diplomat’s comments saying that the US must change course and repair the damage done to Sino-US ties by indiscriminate use of force. On the same line, US ambassador to the United Nations, Ambassador Linda Thomas-Greenfield, said Sunday that China would cross a “red line” if the country decided to provide lethal military aid to Russia for its invasion of Ukraine.

Elsewhere, better-than-forecast prints of the US Consumer Price Index (CPI) and Retail Sales followed the previously flashed upbeat readings of employment and output data and propelled the US Treasury bond yields, as well as the US Dollar. On the same line could be the hawkish Federal Reserve (Fed) comments and the risk-negative catalysts mentioned above.

That said, Fed Governor Michelle Bowman recently said, “We are seeing a lot of inconsistent data in economic conditions,” as reported by Reuters. On the contrary, Richmond Fed President Thomas Barkin said that they are seeing some progress on inflation with demand normalizing, as reported by Reuters.

It should be noted that the mixed bias for the Bank of Japan’s (BoJ) new monetary policy board and chatters of higher inflation in Japan seem to put a floor under the Yen.

Amid these plays, the S&P 500 Futures print mild losses even as Wall Street closed mixed. It’s worth noting that the US 10-year Treasury bond yields rose to the highest levels since early November in the last week and helped the DXY to print a three-week uptrend.

Looking forward, Japan’s National Core Inflation numbers will join the second reading of the US fourth quarter (Q4) Gross Domestic Product to direct immediate USD/JPY moves. However, major attention will be given to the Federal Open Market Committee (FOMC) Meeting Minutes.

Technical analysis

USD/JPY pair’s successful trading above the 200-day Exponential Moving Average (EMA), around 133.80 by the press time, keeps USD/JPY buyers to aim for December 2022 peak surrounding 138.20.