USD/JPY cuts losses and rises to the 130.50 area

• The dollar regains ground against the yen on a rebound in Treasury yields.
• The January preliminary S&P Global US PMI report is coming.
• USD/JPY tries to recapture the 20-day moving average.

USD/JPY erased much of the intraday decline and is near the 130.50 zone at the start of the American session and ahead of the US S&P Global PMI data.

Hours ago, the pair fell to 129.70 but then changed direction and began to recover. It is trading at 130.45, just below Monday’s close.

The Rebote gained momentum in the last hours due to a rise in Treasury bond yields, which remains key for USD/JPY. The 10-year bond yields 3.51%, after having fallen to 3.48%. This comes ahead of the release of the US preliminary S&P Global PMI Index for January which is expected to show services down from 44.7 to 44.5 and manufacturing down from 46.2 to 46.1.

In Japanthe PMI manufacturing it remained at 48.9, while that of services rose to 52.4. The composite index climbed to 50.8, the highest level since October. On the negative side, it was learned that retail store sales fell in annual terms in December to 4% from 4.5%.

The USD/JPY outlook remains bearishsupported by the expectation that the fed will soon reach the peak of monetary tightening, while the bank of japan it would start to come out of its ultra-accommodative policy after April.

Technically, the pair is fighting to return above the 20-day MA which passes 130.50. To the downside, first support is now seen at 129.30/50, followed by 127.50 later. A consolidation below the latter would enable further downsides.

technical levels