- USD/JPY remains on the front foot after positing the biggest daily gains since late June.
- Japan’s Nikkei, US stock futures print mild gains even as T-bond yields hold onto recovery moves.
- Japan marks record infections with 90% Tokyo cases being of Delta covid variant, signals quasi emergency for another eight prefectures.
- Fedspeak, US Treasury Secretary Yellen back renew tapering concerns amid mixed data.
USD/JPY refreshes intraday high to 109.60, up 0.09% on a day, as Tokyo opens for Thursday’s trading. The yen pair portrayed the strongest rebound since May the previous day after the US dollar benefited from the risk-off mood and monetary policy tightening concerns. It should be noted, however, that the recent market moves seem to take clues from the upbeat equities and first yields amid a quiet Asian session.
Not only Fed Vice Chairman Richard Clarida and US Treasury Secretary Janet Yellen but San Francisco Federal Reserve Bank President Mary Daly also flashed clues of tapering in their recent public appearances, which in turn underpin the US dollar’s safe-haven demand. Fed Vice Chair Clarida raised hopes of tapering in 2021 and rate hikes by 2023 if core inflation hits 3% this year while Treasury Secretary Yellen said, per Bloomberg, “By the end of this year inflation will be running at a level consistent with the Fed’s target.” Further, the comments from Daly during the PBS Newshour interview, per Reuters, also backed the hawkish Fed outlook while mentioning that her Modal outlook is that fed will be able to taper later this year or early next year.
Elsewhere, Texas marks the biggest one-day increase in covid cases since early February whereas Japan reported all-time high daily infections on Wednesday. Further, Reuters quoted the Japanese Minister to say that that Delta variant now accounts for 90% of covid-19 infections in the Tokyo region. The same could have been the base for the NHK news, published earlier in Asia, signaling another eight prefectures to be taken in quasi emergencies due to the virus.
It’s worth noting that the US data were quite contrasting on Wednesday as ADP Employment Change for July slumped to 330K versus 695K expected and 680K revised down while ISM Services PMI for July jumped to 64.1 versus 60.4 prior and challenged the market bears.
Amid these plays, S&P 500 Futures and Japan’s Nikkei 225 print mild gains whereas the US 10-year Treasury yields added 1.5 basis points to the previous day’s rebound from a one-week low to 1.195% by the press time.
Moving on, second-tier US data and risk catalysts will direct the USD/JPY pair, likely further north.
Technical analysis
USD/JPY needs to cross the 100-DMA hurdle near 109.65 to keep the previous day’s U-turn from a seven-week-old descending support line, near 108.65.