USD/JPY traces recovery in yields to bounce off one-month low towards 135.00, US inflation, BoJ Minutes eyed

• USD/JPY picks up bids to pare intraday losses, rebounds from one-month low.
• Yields, S&P 500 Futures recover as US regulators tame risks emanating from SVB, Signature Bank.
• BoJ Minutes will be crucial to watch as hawkish bets on the Japanese central bank’s next move escalates after Kuroda’s exit.
• US consumer-centric data will be crucial after recently firmer-than-expected NFP print.

USD/JPY takes a U-turn from the one-month low, marked earlier in Asia, as it picks up bids to 134.50 amid an initial hour of Tokyo open on Monday. Even so, the Yen pair remains on the back foot for the third consecutive day as Bank of Japan (BoJ) Governor Haruhiko Kuroda’s retirement propels hawkish calls for the Japanese central bank’s next moves. Also challenging the pair buyers could be the cautious mood ahead of this week’s top-tier data/events, including the BoJ Minutes and the US consumer-centric numbers including the Consumer Price Index (CPI) and Retail Sales for February.

The Yen pair’s latest rebound could be linked to the recently firmer US Treasury bond yields, as well as risk-on sentiment in the market, mainly driven by the US regulators’ efforts to tame the financial market risks emanating from the Silicon Valley Bank (SVB) and Signature Bank. That said, the US 10-year Treasury bond yields pare the biggest daily loss in four months near 3.75% while the S&P 500 Futures also rebound from a nine-week low.

US Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) took joint actions to tame the risks emanating from the SVB and Signature Bank during the weekend.

“All depositors of Silicon Valley Bank and Signature Bank will be fully protected,” said the authorities in a joint statement released a few minutes back. S&P 500 Futures and US Treasury bond yields consolidate the previous day’s losses after the late plan for the US authorities to tame the financial crisis.

Despite the risk-on mood, escalating hawkish bets on the BoJ’s next move, especially after Kuroda’s retirement, seem to exert downside pressure on the USD/JPY prices. On the same line could be the Federal Reserve (Fed) watchers’ indecision after Friday’s mixed US employment data. That said, the US Nonfarm Payrolls (NFP) grew more than 205K expected to 311K in February, versus 504K (revised), while the Unemployment Rate rose to 3.6% for the said month compared to 3.4% expected and prior. Further, the Average Hourly Earnings rose on YoY but eased on monthly basis for February whereas the Labor Force Participation increased during the stated month.

Looking forward, Wednesday’s BoJ Minutes will be crucial to confirm the latest hawkish bias for the Japanese central bank’s next move, which in turn can weigh on the USD/JPY prices if matching market forecasts. However, firmer prints of the US consumer-centric numbers could renew hawkish Fed bets ahead of the all-important March Federal Open Market Committee (FOMC) and may recall the USD/JPY bulls.

Technical analysis

Although the 200-day Exponential Moving Average (EMA) restricts short-term USD/JPY downside near 134.00, the Yen pair’s latest recovery needs validation from the 100-day EMA level surrounding 135.00.