USD/JPY pierces 128.00 amid mixed Japan data, firmer yields

• USD/JPY extends Monday’s run-up to the highest level in a week.
• Japan’s Unemployment Rate eased, Retail Trade improved but Industrial Production slumped in April.
• US 10-year Treasury yields pare recent losses during the first trading day of the week.
• Full markets, risk catalysts eyed for fresh impulse, US NFP is the key.

USD/JPY takes the bids to renew intraday high around 127.99 as full markets return on Tuesday. In doing so, the yen pair appreciates the firmer US Treasury yields to renew its weekly top, extending the week-start advances, amid mixed data at home and a risk-on mood.

Japan’s Unemployment Rate eases to 2.5% in April versus 2.6% expected and prior whereas the Retail Trade also rose to 2.9% YoY during the stated month, from 2.6% expected and revised down 0.7% prior. However, the preliminary reading of Industrial Production disappoints with -4.8% YoY figure compared to -2.5% market consensus and -1.7% previous readouts.

The US 10-year Treasury yields begin the week’s trading with nearly six basis points (bps) of an upside by crossing the 2.8% hurdle. Even so, “Bonds in almost every corner of the $63 trillion global debt market are bouncing back as investors begin to see value once again in fixed-income asset,” said Bloomberg. The reason for the latest bond selling could be linked to the market’s consolidation during the month-end moves.

Elsewhere, the US Dollar Index (DXY) refreshed its monthly low to 101.29, before bouncing off to 101.34, on Monday as the latest PCE Core Price Index data, the Fed’s preferred gauge of inflation, came in softer and failed to favor some of the hawkish Fed members. On Monday, Fed Board of Governors member Christopher Waller said that he supports lifting interest rates by another 50 bps at the next several Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand, reported Reuters. 

In addition to the US dollar weakness and upbeat concerns for the Euro, China’s gradual opening up of the economy from the covid-led activity restrictions also underpin the risk-on mood and propel the USD/JPY prices.

That said, USD/JPY prices may take clues from risk catalysts and how full markets react to the latest shift in risk appetite, as well as bond moves. Additionally, Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for May could also entertain the pair traders.

Technical analysis

A successful break of a three-week-old descending trend line, around 127.15 by the press time, directs USD/JPY buyers towards the 21-DMA level of 128.70.