USD/JPY: Consolidates recent gains around 109.00 as Treasury yields ease

• USD/JPY takes a U-turn from intraday top, on offer off-late.
• S&P 500 Futures track Wall Street gains, Nikkei 225 prints mild gain at the open.
• Japan Machinery Orders recovered in January, US 10-year Treasury yield steps back from February 2020 top.
• US President Biden’s speech, China data and vaccine updates will be the key.

USD/JPY reverses early Asian session gains while declining towards 109.00 as markets in Tokyo open for Monday’s trading. The risk barometer seems to retrace amid mixed signals concerning the coronavirus (COVID-19) and reflation fears while upbeat data from Japan exert additional downside pressure on the quote.

Japan’s January month Machinery Orders recovered from -5.5% MoM and -0.2% YoY forecasts to -4.5% and +1.5% figures respectively. The data backs the latest rumors surrounding the Bank of Japan’s (BOJ) upcoming plans to drop its six trillion yen ETF buy target.

On the other hand, the US 10-year Treasury yield seems to have reacted to weekend comments from Treasury Secretary Janet Yellen who tried to placate bond bears with her sustained rejection of reflation fears. In her latest interview on the ABC, the ex-Fed Chair said, “Is there a risk of inflation? I think there’s a small risk and I think it’s manageable.” 

It’s worth mentioning that the mixed concerns for the AstraZeneca vaccine, due to Netherlands’ ban on use until March 29 and the drugmaker’s rejection of any blood clotting problems due to the vaccine, seem to challenge the risks.

Though, US President Joe Biden’s comments conveying upbeat results from the latest virtual summit between America, Indian, Australia and Japan favored the optimists. Also on the same line could be the chatters that Tokyo authorities are planning not to extend virus-led emergencies at the end of this week’s stipulated expiry.

Amid these plays, the US 10-year Treasury yield drops one basis point (bp) to 1.625%, after refreshing the 13-month top on Friday, which in turn weigh on the US dollar index (DXY) at the week’s start.

Moving on, USD/JPY traders may take intermediate clues from China’s January month Retail Sales and Industrial Production but today’s speech by US President Joe Biden and this week’s Fed meeting will be the key.

Technical analysis

Unless breaking a three-week-old ascending support line, at 108.60, USD/JPY is less likely to forget rising towards the 110.00 threshold.