BUZZ-COMMENT-Yen bulls get upper hand as dollar follows yields lower

Yen bulls are gathering strength again.

USD/JPY has retraced more than half of Wednesday’s gain, falling below its daily cloud and the 153.25 100-DMA as Treasury yields retreat. This pullback in yields follows PPI data that suggests broader inflation measures are easing, keeping the Fed on track for potential rate cuts

. The decline is also linked to a new year-to-date low in WTI oil, fix-related activity and easing tariff concerns after reports that implementation will be delayed.

While President Donald Trump is expected to announce reciprocal tariffs on Thursday, traders may look for his meeting with Indian Prime Minister Modi to set the tone for future negotiations. The U.S. is looking to reduce its trade imbalance with India by securing commitments to purchase U.S. defense and energy products.

Other factors are working in favor of USD/JPY bears. First, expectations for rate cuts outside of Japan persist due to continued global growth concerns. Second, Japan’s inflation is keeping the Bank of Japan in a tightening cycle. Third, the decline in oil prices is likely to stimulate consumption in Japan rather than reignite deflation fears.

Lastly, traders may expect negotiations for a resolution to the Ukraine conflict to weaken the USD. USD/JPY was around 115 at the onset of the war in 2022.

The options market sees a greater risksof USD/JPY falling further with skews widening in favor of the yen and back-end volatilities rising. As long as spot stays below the 155 pivot level, bears will be in control.

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