- USD/JPY bounces off multi-day low as bears take a breather amid Russia-linked fears.
- US 10-year Treasury yields print five-day downtrend, S&P 500 Futures drop over 1.5%.
- Japan FinMin Suzuki shows readiness to coordinate with G7 in dealing with Ukraine.
- Japan Corporate Service Price Index rose 1.2% in January, US PMIs will decorate calendar.
USD/JPY pares intraday losses around the lowest levels since February 03, recently bouncing off the multi-day bottom to 114.70 during Tuesday’s mid-Asian session.
Despite the yen pair’s latest corrective pullback, the market’s risk-off mood underpins the safe-haven demand of the USD/JPY.
While portraying the mood, S&P 500 Futures drop over 1.5% whereas the US 10-year Treasury yields decline six basis points (bps) to 1.87% by the press time. Further, stocks in Asia-Pacific also portray daily losses amid broad risk-aversion.
Behind the moves are the escalating fears of the Russian invasion of Ukraine as troops from Moscow move closer to borders after President Vladimir Putin called them to mark peacemaking efforts. The move was the second blow to the market sentiment after Russian President Putin declared Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation".
Following that, the Western warnings of Moscow’s readiness for an imminent invasion of Ukraine gained more accolades and spoil the mood. Also negative for the risk appetite are the latest hints by the US, EU, Canada and the UK to criticize the Russian actions.
Additionally, Yomiuri mentioned Japan’s warning to stop the chip exports to Moscow if it invades Ukraine whereas Australia PM Scott Morrison said that they will be in lockstep with allies on sanctions on Russia. It’s worth noting that Japan’s Finance Minister (FinMin) Shunichi Suzuki said Tokyo will coordinate with the Group of Seven (G7) nations in dealing with Ukraine.
Talking about economics, Japan’s Corporate Service Price Index rose 1.2% in January, versus 0.7% forecast and 1.1% expected. On the other hand, holidays in the US and Canada offered a dull start to the week, despite the broad risk-off mood. Though, today’s preliminary readings of February PMIs for the US will be crucial considering the recently softer Fedspeak. That said, Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams on Monday while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”
Read: US Markit PMIs Preview: Services sector has room for upside surprise, boosting the dollar
Technical analysis
USD/JPY pokes a five-month-old support line near 114.50 as bearish MACD signals and a clear downside break of the 50-DMA, around 114.85 by the press time, favor sellers.