USD/JPY slides to 133.00 amid growth concerns, sluggish yields
- USD/JPY takes offers to refresh intraday low, down for the second consecutive day.
- Yields remain pressured for third consecutive day amid recession fears, indecision over Fed’s next move.
- Geopolitical woes can fuel prices as the US, South Korea and Japan held joint military exercises near Hawaii's coast.
- Second-tier US data, risk catalysts are important for fresh impulse.
USD/JPY refreshes intraday low near 133.00 during Tuesday’s initial Tokyo session. In doing so, the yen pair tracks downbeat US Treasury yields, as well as recession fears, during a sluggish session.
Despite the latest rebound, the USD/JPY prices remain weak for the second consecutive day as fears surrounding the economic conditions in China and the US challenge the pair buyers. Also exerting downside pressure on the yen pair is the cautious mood ahead of this week’s Federal Open Market Committee (FOMC) meeting minutes.
China’s Retail Sales eased to 2.7% YoY in July versus 5.0% expected and 3.1% prior whereas Industrial Production (IP) edged lower to 3.8% during the stated month, from 3.9% prior and 4.6% market forecasts. Additionally, the People’s Bank of China (PBOC) surprised markets on Monday by cutting the one-year medium-term lending facility (MLF) rates by 10 basis points (bps) and trying to push back the bears.
On the other hand, the US NY Empire State Manufacturing Index for August dropped to 31.3 in August from 11.1 in July and 8.5 market forecasts. Further, the US August NAHB homebuilder confidence index also fell to 49 versus 55, its lowest level since the initial months of 2020.
Given the downbeat data from the world’s top-two economies, fears of recession regain attention after the brief absence during the last week, mainly due to the softer US inflation data.
On a different page, headlines suggesting improved coronavirus conditions in China's financial hub Shanghai and the resumption of the Russian bonds’ trading on Wall Street failed to improve the risk appetite. Furthermore, hopes of a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), could favor the risk-on mood. On the same line were comments from China’s President Xi suggesting more efforts to revive the world’s second-largest economy.
Elsewhere, Reuters reported that the United States, South Korea and Japan participated in a missile warning and ballistic missile search and tracking exercise off Hawaii's coast last week, the Pentagon said on Monday. It was also revealed afterward that the US and South Korea will hold joint military drills from August 22 and September 01. The geopolitical fears are an extra burden on the market sentiment and weigh on the USD/JPY prices.
Against this backdrop, the US 10-year Treasury yields print a three-day downtrend around 2.775% while the S&P 500 Futures decline 0.13% intraday at the latest.
Moving on, risk catalysts and the second-tier activity and housing data from the US can entertain intraday traders.
Technical analysis
The 10-DMA guards immediate USD/JPY upside around 133.80 inside a three-week-old symmetrical triangle between 132.35 and 134.20.