USD/JPY traces yields to retreat from monthly high towards 137.00, ignores Japan PMI

• USD/JPY holds lower ground near intraday low, snaps five-day uptrend at one-month high.
• Japan’s Jibun Bank PMIs for August came in softer than expected and prior.
• Yields ease as traders brace for US PMIs, Jackson Hole Symposium.
• Risk catalysts will be crucial to follow as bulls remain hopeful amid recession woes, and hawkish Fed bets.

USD/JPY takes offers to renew intraday low around 137.20, extending the pullback from a monthly high during Tuesday’s Asian session, as market sentiment dwindles amid mixed signals and a cautious mood ahead of the key data/events. In doing so, the yen pair prints the first daily loss in six even as Japan’s activity data for August appear downbeat.

The preliminary readings of Japan’s Jibun Bank Manufacturing PMI for August dropped to 51.0 versus 51.8 expected and 52.1 prior. Similarly, the Jibun Bank Services PMI declined to 49.2 from 50.3 in previous readings and 50.7 market consensus.

Elsewhere, the US 10-year Treasury yields retreat from the monthly high of 3.04%, down nearly two basis points (bps) to 3.02% by the press time.

The pullback in the benchmark US bond coupons could be linked to the absence of major catalysts, as well as mixed chatters surrounding the People’s Bank of China (PBOC). China's Securities Times recently reported that the PBOC might reduce RRR this year to compensate for medium-term lending facility (MLF) maturity. The article states reserve requirement ratio (RRR) cuts may lower prime lending rates. It is with noting that this is a state-run agency reporting such opinions.

It should be noted that Japan’s readiness for further printing of money and Japanese exporters’ profit booking move seems to have also favored the USD/JPY pair’s latest pullback. “Japan's Ministry of Finance is set to request 26.9 trillion yen ($195.5 billion) for debt servicing in the fiscal year beginning in April 2023, Yomiuri newspaper reported on Tuesday,” per Reuters.

Even so, expectations of higher Fed rates and firmer US data join the geopolitical fears surrounding Russia and Ukraine to keep the USD/JPY buyers hopeful.

The preliminary readings of the US PMIs for August will join the US New Home Sales for July and Richmond Fed Manufacturing Index for August to decorate today’s calendar. However, Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, up for publishing on Friday, will be crucial for clear directions.

Technical analysis

The 137.50-55 area challenges USD/JPY bulls targeting the yearly low marked in July around 139.40. However, sellers remain cautious until the quote exceeds the 50-DMA support level of 135.57, especially amid the bullish MACD signals and firmer RSI (14).