USD/JPY gains on climbing US 10-year bond yields

Because of the general strength of the US dollar and high US yields, the USD/JPY is rising. The US Federal Reserve’s expected rate cut had been reassessed.

A look at upcoming US data, the ISM Services PMI, and job openings on JOLTs. Although it stays below the Ichimoku Cloud (Kumo), which indicates the pair is continuing an upward correction while resuming its downward trend, the USD/JPY pair gains more than 0.30% on Monday. As a result, the major has recovered to trade at 147.23 from its daily low of 146.22.

The pair sees a spike, closing at 147.23, as Fed signals and recent economic data cause the market dynamics to change. The US Treasury bond yields, particularly those of the 10-year benchmark note, are rising and are expected to continue trending higher. This is positive news for the major market as the USD/JPY pair continues to rise. According to data from the Chicago Board of Trade (CBOT), investors aggressively priced in rate cuts by the US central bank.

The Federal Reserve’s projected December 2024 Federal Funds Rate futures contract indicated last Friday that rates would be lowered by 140 basis points to 4.105%. Nevertheless, investors’ reduction of rate-cut bets by Jerome Powell and Co. has caused a ten basis point jump in the same contract.

Investors were disappointed by US Factory Orders data, which showed a contraction of -3.6% in new orders for US-made goods, below September’s 2.3% expansion but above estimates of a -2.8% contraction, according to the US Commerce Department. This month’s decline is the biggest since April 2020. The markets, which are anticipating the release of the ISM Non-Manufacturing PMI on Tuesday along with employment data, were unmoved by the data.

Regarding Japan, Jibun Bank Services, Composite PMIs, and the Tokyo inflation report will all provide guidance for the Japanese Yen (JPY).