USD/JPY nudges back lower with bond yields in focus

The pair is slipping back to 149.50 levels, holding at the lows for the day after a brief bounce back above 150.00 earlier. The high touched 150.30 but was stopped by the 100-hour moving average. That reaffirms a more bearish near-term bias still in the pair, with sellers now pushing the agenda for another test below the figure level.

In the bigger picture, there is still some work to get below the December lows around the region of 148.65-00. That’s a key test for sellers as they look to stick with the downside momentum since the turn of the year.

The good news is that there might be help from the bond market, as a key level is also coming into play for 10-year Treasuries.

10-year yields in the US are now down to 4.375% and that is contesting a break of its 100-day moving average of 4.38%:

This is one to watch out for on the week, with yields slipping below the early February low of 4.40% this week.

All that being said, it’s going to be rather tricky in reading into the moves this week. For one, the risk mood is also looking more on the defensive but then we still have Nvidia’s earnings tomorrow.

Besides that, Japanese bond yields have also hit a bit of a ceiling after BOJ governor Ueda warned of taking action against “abnormal” market moves at the end of last week. 10-year JGB yields are stuck around 1.38% now, well down from the high of 1.46% last week.

Then, there’s also month-end flows to consider this week with the dollar mood already keeping rather mixed in general.

But as mentioned a couple of times last week here and here, the path of least resistance is still for a move lower in USD/JPY for now at least.

However, as seen above, there now needs to be that break of the support region of 148.65-00 to really accelerate any further downside pressures in the pair. And that might not come by so easily unless the bond market plays ball this week.

This article was written by Justin Low at www.forexlive.com.