USDJPY sellers approach 146.00 amid sluggish yields, Kuroda’s reiteration, US inflation eyed

  • November 10, 2022
  • USDJPY takes offers to reverse the previous day bounce off a two-week low.
  • Yields remain sidelined amid downbeat US inflation expectations, mixed Fedspeak.
  • BOJ’s Kuroda defends easy money policy, hopes slowdown in consumer inflation.
  • US CPI for October will be crucial as downbeat forecasts tease bears.

USDJPY sellers return to the table, after the previous day’s absence, amid bearish bias for the US inflation and downbeat Fedspeak. Also exerting downside pressure on the Yen pair are the sluggish yields and the latest comments from Bank of Japan (BOJ) Governor Haruhiko Kuroda. That said, the quote drops towards the intraday low surrounding 146.10 during early Thursday morning in Europe, fading Wednesday’s rebound from the lowest levels in a fortnight.

BOJ’s Kuroda reiterated his favorite speech in testimony to Diet, the Japanese parliament, while defending the Japanese central bank’s easy money policy. The BOJ Boss also turned down the hopes of any direct forex market intervention by the central bank to safeguard the national currency.

Elsewhere, the US Treasury yields remain mixed after declining in the last two consecutive days. While portraying the mood of the bond traders, the 10-year Treasury yields pause the two-day downtrend near 4.10% whereas the US two-year bond coupons print the first daily gains, so far, in three around 4.60% at the latest.

On the other hand, Minneapolis Federal Reserve (Fed) President Neel Kashkari recently mentioned, “We will do what we need to do to bring inflation back down.” Before him, New York Federal Reserve (Fed) President John Williams previously mentioned that the relatively stable long-term inflation expectations are good news. On the same line, Richmond Fed President Thomas Barkin also mentioned that the Fed’s fight against inflation may lead to a downturn in the US economy but that is a risk that the Fed will have to take.

It’s worth noting that the US inflation expectations, as per the 5-year and 10-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, also weigh on the USDJPY prices.

Furthermore, a cautious optimism portrayed by the S& 500 Futures and stocks in the Asia-Pacific region also help the USDJPY bears to reverse the previous day’s gains. Headlines surrounding Russia also seemed to have favored the latest cautious optimism as Moscow appears to retreat from the only Ukrainian regional capital captured, namely Kherson. Furthermore, President Vladimir Putin is less likely to attend the upcoming G-20 summit in Bali, starting on November 15. Additionally, a slight reduction in China’s daily covid numbers, from 1,294 to 1,133 in Mainland, joins the receding hopes of Democrats to gain major power share in the US midterm elections to help favor the optimists.

Having witnessed a tumultuous week so far, USDJPY traders are likely preparing for the pair’s further downside amid hopes that easy US Consumer Price Index (CPI) for October could back the softer rate hikes in December. Forecasts suggest that the headline CPI will ease to 8.0% YoY from 8.2% prior while the more important Core CPI may remain mostly unchanged near 6.5%, compared to 6.6% previous readings.

Also read: US October CPI Preview: US Dollar to weaken on a CPI-inspired risk rally

Technical analysis

Although the 50-DMA defends USDJPY buyers around 145.50, the upside momentum needs to cross the three-week-old resistance line, around 147.00 by the press time, to reverse the latest bearish trend.