USD/JPY tracks firmer yields to rise past 134.00 despite hawkish BoJ talks, mixed Japan data

• USD/JPY picks up bids to print three-day winning streak, grinds near intraday top.
• BoJ’s Kuroda highlights higher wages, Japan’s Jibun Bank PMIs for February came in mixed.
• Treasury yields reverse Friday’s pullback as full markets return.

USD/JPY grinds higher around intraday top surrounding 134.35-40 amid a three-day uptrend during early Tuesday. In doing so, the Yen pair tracks the recent pick up in the US Treasury bond yields while struggling to justify hawkish comments from Bank of Japan (BoJ) Governor Haruhiko Kuroda and the mixed Purchasing Managers Index (PMI) for February.

That said, preliminary readings of Japan’s Jibun Bank Manufacturing PMI dropped to the lowest levels since September 2020, to 47.4 versus 48.9 expected and prior. The Services PMI, however, offered a positive surprise with 53.6 figure compared to 51.5 market forecasts and 51.1 previous readouts.

Elsewhere, BoJ’s Kuroda said that wage growth will likely accelerate as companies increase pay to compensate households for the higher cost of living, and cope with an intensifying labor shortage. The same raises fears of a higher BoJ rate when Kuroda retires in April.

However, the talks that Kuroda will play his last shot strongly enough to mark his reign at the BoJ as a remarkable dovish one keep the USD/JPY buyers hopeful.

It should be noted that yields recovered on the full markets’ return as hawkish hopes from the US Federal Reserve (Fed) renewed, which in turn underpinned the US Dollar’s recovery. On the other hand, the US and China alleged each other over the balloon shooting whereas the US diplomatic ties with Taiwan teased Beijing. On the same line, the United Nations (UN) Security Council is alarmed by Japan for North Korea’s missile testing and the same weigh on the sentiment, as well as favors the US Dollar.

Against this backdrop, the US 10-year Treasury bond yields pick up bids to near the highest levels marked since early November 2022, mildly bid around 3.86% at the latest. On the same line, S&P 500 Futures declined 0.40% intraday to 4,070 at the latest.

Looking ahead, risk catalysts may entertain USD/JPY traders ahead of the first readings for the US February PMIs. Should the scheduled US PMIs appear firmer than what was marked in January, and also manage to cross the 50.0 mark despite unimpressive expectations, the odds of witnessing further USD/JPY run-up can’t be ruled out.

Technical analysis

A clear upside break of the one-month-old previous resistance line, now support near 134.00, directs USD/JPY further towards the north.