USD/JPY bears eye 139.00 as Japan real wages tease BoJ hawks, yields ease

• USD/JPY takes offers to refresh intraday low, extends week-start downturn.
• Japan’s Overall Household Spending drops the most since June 2021, real wages drop for 13 consecutive months.
• Market sentiment dwindles as easing hawkish Fed bias joins fresh banking woes, light calendar and pre-FOMC blackout.
• Risk catalysts are the key amid absence of top-tier data/events in Japan, US.

USD/JPY drops for the second consecutive day to around 139.40 as Tokyo opens for Tuesday’s trading. In doing so, the Yen pair fails to justify downbeat Japan data while tracing softer United States Treasury bond yields amid a sluggish Asian session.

That said, Japan’s Overall Household Spending dropped the most since June 2021, by -4.4% in April versus -2.3% expected and -1.9% prior. On the same line, the nation’s Labor Cash Earnings also fell 1.3% from 0.8% previous readings and 0.5% market forecasts. It should be noted that the nation’s Inflation-adjusted real wages dropped 3.0% in April from a year earlier, a faster decline than a revised 2.3% fall in March, per Reuters.

Given the Japanese data suggesting inflation’s negative impact on earnings and pushes the Bank of Japan (BoJ) hawks, the Japanese Yen (JPY) manage to extend the week-start strength.

Apart from the data, Monday’s chatters about the Japanese government’s likely intervention to defend the domestic currency also weigh on the USD/JPY pair. That said, Reuters unveiled a report suggesting that bets against the Japanese Yen have risen to $8.6 billion equivalent, a similar level when Japan’s authorities intervened last year.

On the other hand, US ISM Services PMI declined to 50.3 for May versus 51.5 expected and 51.9 prior whereas growth of the Factory Orders also deteriorated during the stated month to 0.4% versus 0.5% market forecasts and 0.9% previous readings. It should be noted that the final readings of S&P Global Composite PMI and Services PMI also marked softer figures for May.

It should be noted that the mixed US data weighed on the market’s bets on the Fed’s June rate hike dropped from around 80% in the middle of the last week to nearly 25%. The same could have joined an absence of the Fed talks to weigh on the US Treasury bond yields and the US Dollar.  With this, the US 10-year Treasury bond yields remain pressured around 3.68%, after reversing Friday's rebound the previous day, whereas the two-year bond coupons also defend the week-start bearish bias near 4.46% by the press time.

Amid these plays, Wall Street closed in the red whereas S&P500 Futures print mild losses by the press time.

Looking ahead, a lack of major data/events can keep the USD/JPY pair vulnerable to the risk catalysts for clear directions.

Technical analysis

Although the RSI and MACD conditions hint at a pullback in the USD/JPY prices, a two-week-old symmetrical triangle restricts immediate moves between 140.35 and 138.55.