• USD/JPY retreats from two-month high, sidelined of late.
• Yields remain sluggish after refreshing the multi-day top.
• Mixed Japan data contrasts with strong US statistics, hawkish Fed bets to keep buyers hopeful.
• FOMC Minutes should refrain from policy pivot talks to keep Yen pair buyers hopeful, Japan wage talks eyed as well.

USD/JPY bulls take a breather after a three-day winning streak, making rounds to 135.00 as Tokyo opens on Wednesday. In doing so, the Yen pair tracks the grinding of the US Treasury bond yields around multi-day top ahead of the key Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes. It should be noted that the recently softer Japan data and upbeat US statistics underpin the hawkish Fed bets to keep buyers hopeful.

Recently, Reuters Tankan Manufacturing Index for Japan came in as -5.0 for February versus -6.0 in January. On the same line, Tankan Non-Manufacturing Index eased to 17 for the said month versus 20.0 prior.

On Tuesday, the preliminary readings of the US S&P Global Manufacturing PMI rose to 47.8 from 46.9 prior and versus 47.3 market forecasts while the Services PMI jumped to the eight-month high to 50.5 compared to 47.2 expected and 46.8 previous readings. As a result, the S&P Global Composite PMI surpassed 47.5 analysts’ consensus and 46.8 previous reading to mark 50.2 figure.

Further, Japan’s wage talks and signals for higher payments to workers in Tokyo seem to underpin the need for hawkish Bank of Japan (BoJ) action even if the latest chatters favor Governor Haruhiko Kuroda’s one last shot at the ultra-easy monetary policy before he retires in April.

On the other hand, the FEDWATCH tool signals that the money market participants see the benchmark level peaking at 5.3% in July, and staying near those levels throughout the year, versus 5.10% expected by the US Federal Reserve (Fed).

It should be noted that the upbeat US data and hawkish Fed bets propelled the US Treasury bond yields the previous day. That said, the benchmark 10-year bond coupon refreshed a three-month high near 3.95% while the two-year counterpart also jumped to the highest levels since early November 2022, to 4.73% at the latest. By the press time, the US 10-year and two-year Treasury bond yields remain sidelined near 3.96% and 4.73%.

On a different page, Wall Street closed in the red as geopolitical fears emanating from Russia and China joined the aforementioned hawkish Fed bets, as well as downbeat earnings forecasts from the tops US retailers including Home Depot and Wall Mart.

Amid these plays, S&P 500 Futures print mild gains by the press time while Japan’s Nikkei 225 drops 0.85% on a day by the press time.

Moving on, a cautious mood ahead of the key data/events could entertain USD/JPY traders before the Fed Minutes. However, any mention of the policy pivot in the Minutes should weigh on the price as BoJ doves aren’t far from the field.

Technical analysis

A daily closing beyond the 100-day Exponential Moving Average (EMA), around 134.75 by the press time, directs USD/JPY buyers towards mid-December 2022 tops surrounding 138.20.