Japanese Yen, USD/JPY, Fed, Government Bond Yields, Biden – Talking Points
- APAC markets brace for a possible risk-off open after US stock market rally stalls
- Government bond yields extend higher after Fed Chair Powell talks 50 bps rate hike
- USD/JPY eyes 120 psychological level after setting a fresh 2022 high overnight
Tuesday’s Asia-Pacific Forecast
Asia-Pacific markets may see a cautious start to today’s trading session after comments from Federal Reserve Chair Jerome Powell pushed US equity markets to close in the red. The Fed chair stated a 50 basis point rate hike is on the table to fight inflation. The prospect of higher US rates and the ensuing risk-off move pushed USD/JPY to a fresh 2022 high. Treasury yields rose across the curve, and stocks fell. Australian government bonds also sold off, with the 10-year yield gaining nearly 20 bps overnight and rising to its highest level since November 2018.
China kept its one- and five-year loan prime rates (LPR) unchanged yesterday. The one-year LPR was held steady at 3.70%, and its five-year LPR remained at 4.60%. This follows the People’s Bank of China (PBOC) keeping its medium-term lending facility (MLF) rate steady last week. Despite the hold, most analysts still see China easing policy throughout the rest of the year. However, the diverging policies between the PBOC and other major central banks have hampered the premium Chinese government bonds pay. That may repel foreign capital from China’s financial markets, adding another potential headwind for the economic powerhouse to achieve its 5.5% growth target this year.
Today’s economic docket is void of high-impact events, but the Philippines will report its retail price index for December, and Japan’s coincident index and leading economic index will see final updates for January. Reserve Bank of Australia (RBA) Governor Philip Lowe is set to give a speech at 01:00 GMT. The Australian Dollar may see some movement if Mr. Lowe’s comments alter RBA rate hike bets.
Gold and silver prices pushed higher overnight on the risk-off market shift, although an extended run higher is hard to see at the current time given rising Treasury yields and the firming up of US rate hike bets. WTI and Brent crude oil prices may continue rising as reports continue to indicate an increasing appetite among EU members to ban Russian oil. President Joe Biden will visit Poland on Friday to shore up already firm support among NATO members.
USD/JPY Technical Forecast
USD/JPY broke into a fresh 2022 high overnight, extending a rally from earlier this month when prices broke out from a consolidative range. The Relative Strength Index (RSI) is at its highest level since April 2021 and continues to rise. The 120 psychological level may offer some resistance. If so, it could prompt a pullback, especially if momentum indicators like the RSI and MACD begin to weaken at that level. A pullback to the 161.8% Fibonacci retracement or the 20-day Simple Moving Average (SMA) may be on the table. Alternatively, prices may extend past the 120 level altogether.
USD/JPY Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter