USD/JPY regained most of its early losses after US GDP data and bond yields increased. Earlier this week Japanese Yen started to take back its loss against the US dollar.
Global Risk-off mode, with more warnings about the fate of the war in Ukraine and the risk of food scarcity, can create another crisis, with even worse results than war itself.
US 10-year bond yields back above 2.8%
On the other hand, while the market counted on a 2-3% interest rate before year-end, the latest FOMC members' speeches and FED May meeting minutes reduced expectations for a faster interest rate hike. Now, a 50pb rate hike in the Jun meeting is more likely, a 50bp rate hike in July is less likely, and it is widely expected to see a pause in the September meeting. These factors put pressure on the US dollar index to lose some of its gains under the 102 mark.
Meantime, comments and outlooks that FED can pause the rate hike cycle in September reduced the bond Yields to such an extent that US 10-year bond yields saw 2.72%.
Wednesday and Thursday, US bond Yields started to increase, and now, Yields on the 10-year benchmark Treasury are back to around 2.8%. Higher yields in the US usually make it more attractive for Japanese investors to buy bonds instead JGB, which is negative for the Japanese Yen (JPY) against the US dollar.
Besides all of the economic data, BoJ also continues its supporting acts with more dovish policies. At the same time, the central bank in the US has one of the most hawkish policies among developed economies. This diversion in the central banks' policies is another pressure factor on the Japanese Yen. Therefore seen at much lower levels, it sounds a bit unlikely in the short term.
From the technical point of view, USDJPY has strong support at 125.20. As long as pairing trading is above this level, we can still count on higher levels, but breaching under this level, doors will open for 121 areas and lower.