The US dollar/yen is striving to continue the early week correction from a two month high.

The yield is still low, and stock futures have recorded a mild increase in Mond's position.

The second line positive sentiment also pushed down sellers against the yen.

The incoming board of directors of the Bank of Japan poured cold water on the hawkish expectations, defending YCC's actions.

The US dollar/yen stampeded around 136.10-20 in the Asian session on Tuesday, while depicting market inaction in month end positioning and lack of major data/events. Nevertheless, the dovish remarks of the incoming Bank of Japan (BoJ) officials, along with cautious optimism, laid the foundation for yen prices after the yen reversed from Monday's two month high.

Recently, the Deputy Governor of the Bank of Japan (BoJ), Shinichi Ueda, testified in the upper house of the Japanese parliament while defending the central bank's loose monetary policy. By doing so, Ueda ruled out hopes of changing the 2.0% inflation target and supporting the Yield Curve Control (YCC) policy.

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Previously, Bank of Japan Vice President Masahiro Watanabe stated that "central banks must remain vigilant against the potential dangers of long-term stagnation and low inflation, as cost driven price increases will not last for long," Reuters reported.

It is worth noting that the pessimistic data on industrial production (IP) in Japan in January contrasts sharply with the promising growth in the country's retail trade data, but fails to provide any clear direction for the US dollar/yen. Nevertheless, Japan's intellectual property rights shrank by 4.6% in January, compared to an expected -2.6%, compared to a previous value of 0.3%. However, after seasonal adjustments, the retail industry grew by 1.9% month on month, higher than the previous 1.1% and market forecast of -0.2%.

On the other hand, market sentiment has improved, with headline news indicating that despite political differences between the United States and China, the United States has still extended an olive branch to Chinese companies. Therefore, due to the risk barometer position of the quotation, the US dollar/yen has posed a challenge to bears. According to Politico's report on Monday evening, "Despite tense relations with Beijing, it is expected that US President Biden will abandon extensive new restrictions on US investment in China, denying the push from his government and some hawkish members of Congress.

In other places, mixed US data conflicts with hawkish Fed speeches and tensions between the US and China, leading to a lack of clarity in the market. Nevertheless, durable goods orders in the United States decreased by -4.5% in January, compared to an expected -4.0%, from a previous value of 5.1%. However, orders for non defense capital goods other than aircraft increased by 0.8%, while analysts' expectations were 0.0%, compared to the previous value of -0.3%. Similarly, sales of unsold homes in the United States rose 8.0% month on month, with an expected 1.0%, compared to the previous 1.1%.

In addition, Federal Reserve Governor Philip Jefferson stated on Monday that it is important to return to a 2% inflation rate to allow for these sustained economic gains. Reuters also portrayed the concerns of hawkish Fed members, stating that "this month's economic data reflects the continued tension in the job market and stagnant inflation, leading federal fund futures traders to bet on rate hikes. Currently, the US interest rate peaked in September at 5.4%, higher than the current 4.58%. Therefore, hawkish Fed concerns are investigating adventurers. Similarly, tensions between China and the US around Taiwan and Russia may also be the same.

Next, USD/JPY traders should focus on the risk catalysts before the US second tier data to gain clear direction.

technical analysis

Although the USD/JPY has reversed its upward resistance line from three weeks ago (around 136.90) as of the time of publication, the USD/JPY remains bullish unless it breaks through the support level of 133.90 on the 200 day moving average (EMA).