USD/JPY bulls trace firmer yields above 140.00, US PMIs, Japan GDP eyed

• USD/JPY renews intraday high amid cautious mood, firmer yields.
• Downbeat Japan PMI versus strong US NFP adds strength to Yen pair’s run-up.
• US ISM Services PMI, Japan’s final Q1 GDP eyed for clear directions amid Fed blackout.

USD/JPY clings to mild gains around 140.20 as it cheers upbeat Treasury bond yields, as well as the firmer US Dollar to propel the USD/JPY prices. Adding strength to the Yen pair’s upside is the risk-aversion wave, as well as downbeat Japan data.

That said, Japan’s Jibun Bank Services PMI for May dropped to 55.9 versus 56.3. On the contrary, “The composite PMI, which combines the manufacturing and services activity figures, expanded at the fastest pace since October 2013. The index advanced to 54.3 in May from 52.9 in April, staying above the break-even 50 mark for the fifth straight month,” said Reuters.

On the other hand, hawkish Fed bets and receding fears of the US default underpin the US Treasury bond yields and the US Dollar. That said, Friday’s US employment numbers renew the odds of the Federal Reserve’s (Fed) rate hikes.

Talking about the data, the US Nonfarm Payrolls (NFP) renewed hawkish Fed concerns. That said, the US jobs report for May surprised markets with a jump in the headline Nonfarm Payrolls (NFP) by 339K versus 190K expected and 294K prior (revised). It’s worth noting, however, that the Unemployment Rate also rose to 3.7% from 3.4% prior, versus 3.5% market forecasts. It should be noted, that the Average Hourly Earnings eased whereas the Labor Force Participation Rate remain the same as previous.

Apart from that, the Shangri-la Dialogue in Singapore renewed geopolitical fears surrounding the US and China amid no meeting of the policymakers of both nations, as well as an incident suggesting escalating war fears among the Sino-American navies in the Taiwan Strait. Furthermore, news from Russian Defense Ministry suggesting large-scale military operations by Ukraine also weigh on the sentiment and put a floor under the US Dollar.

It’s worth noting, however, that the hawkish concerns about the Bank of Japan (BoJ) officials and optimism about the US debt ceiling deal, as well as US credit rating, prod the USD/JPY bulls. That said, US President Joe Biden signed the debt-ceiling bill and avoided the ‘catastrophic’ default. Also negative for the DXY were concerns suggesting slower rate hikes from the major central banks. Furthermore, the global rating agencies remain cautious about the US financial market credibility and prod the US Dollar despite the price-positive move on Friday. “Fitch Ratings said on Friday the United States' "AAA" credit rating would remain on negative watch, despite the agreement that will allow the government to meet its obligations,” said Reuters.

Against this backdrop, Wall Street closed higher and the US Treasury bond yields marked the first weekly loss in four, grinding higher of late. It’s worth observing that the S&P500 Futures print mild losses amid mixed sentiment.

Moving on, today’s US Services PMI and Factory Orders for May can entertain intraday traders ahead of Friday’s final readings of Japan’s first quarter (Q1) 2023 Gross Domestic Product (GDP). Above all, risk catalysts and the bond market moves are critical for the Yen pair traders.

Technical analysis

Although the USD/JPY bears remain off the table beyond the previous resistance line stretched from December 15, 2022, around 137.40 by the press time, an ascending trend line from late 2022, close to 141.20 by the press time, challenges the Yen pair’s short-term upside.