- USD/JPY snaps two-day downtrend with mid gains, retreating of late.
- Russia-Ukraine peace talks turned inconclusive on Monday, Moscow stretches invasion of Kyiv.
- Yields underpin USD rebound ahead of US ISM PMI, Biden’s SOTU.
Despite starting March on a positive footing, USD/JPY pares intraday gains around 115.10 ahead of Tuesday’s European session.
The yen pair portrays the market’s anxiety amid mixed concerns over the geopolitical tussles between Russia and Ukraine. Also challenging the risk barometer pair is the cautious mood ahead of US ISM Manufacturing PMI for February and US President Joe Biden’s State Of The Union (SOTU) speech, where he is expected to speak on inflation per the latest White House update.
Recent headlines concerning the Russia-Ukraine crisis hints at another tranche of Western economic sanctions on Moscow while Russian diplomats harshly criticize the punitive measures levied due to their, “special operation.” Further, Russian militaries attack civilian buildings and trigger an exodus of people from Ukraine.
It’s worth noting that the peace talks between Ukraine and Russia failed to provide any conclusion the previous day but haven’t been turned down, which in turn keeps markets hopeful of an intermediate solution to the grim issue.
Other than the downbeat sentiment, firmer US Treasury yields and inflation expectations also favor the US Dollar Index (DXY) of late. That said, the DXY rises 0.15% to 96.85 while the 10-year Treasury yields rose two basis points (bps) to 1.86% by the press time. On Monday, US inflation expectations rallied to a 14-week top, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.
It’s worth observing that the Euro Stoxx 50 Futures rises 0.70% intraday while the S&P 500 Futures print mild losses at the latest, which in turn flash another signal of the market’s indecision and the same clutches recent USD/JPY moves.
That said, USD/JPY traders will keep their eyes on the risk catalysts for fresh impulse as the Russia-Ukraine crisis is a hot topic. Should the geopolitical tensions worsen, the yen pair may witness further downside due to the yen’s traditional safe-haven appeal.
Technical analysis
Sustained U-turn from five-week-old previous support, near 116.00 at the latest, directs USD/JPY prices towards the 100-DMA support of 114.40.