REFILE-BUZZ-COMMENT-Yen bulls turn attention to growth outside Japan

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Yen bulls need a more dovish Fed to advance further.

The rise in JGB yields, which has been driving yen gains, may slow as Japanese authorities address the recent yield surge and its consequences. Future signaling by Bank of Japan officials on tightening may help to flatten the curve, supporting the yen without causing significant disruption.

Overall, Japanese policymakers are generally comfortable with USD/JPY near 150, given the rounds of intervention since it breached that level in 2022 and warnings about yen strength when it fell below 140 in September. The 149.23 level represents a 50% Fibonacci retracement of the move from the September low to the January high of 158.88.

For the yen to add to year-to-date gains, economies outside Japan may need to falter. Data on service jobs, in particular, will be closely monitored to gauge a country’s longer-term economic health. On Friday, the yen rose broadly after the U.S. PMI services index, likely impacted by government spending cuts, unexpectedly moved into contraction territory. The combination of lower Treasury yields and a pullback in U.S. equities from record highs helps revive the yen’s appeal as a safe haven, particularly against European currencies.

Positioning indicators suggest that speculative accounts are building yen longs this week. Futures open interest is at its highest level since September.

Technically, a series of lower highs on daily and weekly charts suggests maintaining a strategy of selling USD/JPY rallies. The pair, currently near its lower Bollinger Band, would need to surpass the February 7 low at 150.93, the weekly cloud bottom at 151.11, and the 9-day exponential moving average at 151.29 to neutralize bearish sentiment.

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