USD/JPY grinds near 134.00 as US Dollar, yields fail to cheer hawkish Fed bets

• USD/JPY seeks fresh direction after reversing from the highest levels in five weeks.
• Downbeat US data surpsede hawkish Fed talks and weigh on US Dollar, Treasury bond yields.
• Japan’s Reuters Tankan survey flashes unimpressive figures while BoJ officials defend easy-money policy.
• Risk catalysts eyed for clear directions, yields, central bank talks are the key for fresh impulse.

USD/JPY picks up bids to pare the previous day’s U-turn from a five-week high around 134.00 as Tokyo opens for Wednesday. In doing so, the Yen pair fails to cheer the downbeat US Dollar and the Treasury bond yields amid a sluggish start to the day. Also likely to have prod the Yen pair could be the latest Reuters Tankan Survey data.

That said, Japan’s Reuters Tankan Survey for April reprints -3.0 figure for Large Manufacturers whereas the Non-Manufacturers’ April index rose to 24 versus 21 in March.

Apart from the overall upbeat Japan data, the Bank of Japan (BoJ) Official’s defense of the ultra-easy monetary policy renews concerns about the BoJ’s exit from easy money and weighs on the USD/JPY price. That said, New Bank of Japan (BoJ) Governor Kazuo Ueda said that BoJ bond purchases are not aimed at monetizing government debt while adding, “Interest rates are determined by various factors.” The policymaker also stated that there is no immediate need to review the 2013 joint statement with the government. Before BoJ’s Ueda, the newly appoint BoJ Deputy Governor Shinichi Uchida also tried to defend the current monetary policy as he said, “Fiscal constraints won't undermine the ability to carry out monetary policy.”

It’s worth noting that the US Housing Starts and Building Permits roiled the mood with downbeat prints for March on Tuesday. That said, the Housing Starts eased to 1.42M versus 1.432M prior and 1.40M market forecasts whereas the Building Permits dropped to 1.413M from 1.55M previous readings and analysts’ estimations of 2.2M.

Also weighing on the US Dollar and yields, as well as the USD/JPY pair could be the Fed policymakers’ failed attempt to convince markets of the US central bank’s hawkish ability. That said, US Housing Starts and Building Permits roiled the mood with downbeat prints for March on Tuesday. That said, the Housing Starts eased to 1.42M versus 1.432M prior and 1.40M market forecasts whereas the Building Permits dropped to 1.413M from 1.55M previous readings and analysts’ estimations of 2.2M.

Against this backdrop, S&P 500 Futures print mild losses and Wall Street closed mixed. Further, the US 10-year and two-year Treasury bond coupons dropped for the first time in four days by the end of Tuesday, sluggish around 3.59% and 4.21% by the press time.

Looking forward, Japan’s Industrial Production for February will precede the Fed Beige book to direct short-term USD/JPY moves. It should be noted that the recent challenges to the sentiment, emanating from China, seem to also exert downside pressure on the Yen pair amid a light calendar and a sluggish day.

Technical analysis

Despite reversing from a one-month-old ascending resistance line, around 134.80 by the press time, the USD/JPY bears need validation from the 21-DMA and a three-week-old ascending support line, respectively near 132.50 and 131.85, to convince sellers.