The U.S. dollar/Japanese yen has recovered from its intraday low but is still trading near 132.00 as of early Tuesday am in Europe.

The Yen pair initially welcomed Treasury bond yields. Still, hawkish suspicions were prompted by the Japanese government’s comments of BoJ officials, which led to a decline in the value of the Yen. The general decline in the value of the U.S. dollar as investors look forward to a positive Consumer Price Index (CPI) surprise for January also favours USD/JPY negative.

Preliminary estimates for Japan’s GDP in Q4 were mixed earlier in the day. After Kazuo Ueda’s nomination to the Bank of Japan, the U.S. dollar fell against the Japanese Yen. Bloomberg, however, foresaw impending opposition to Kazuo Ueda’s easy-money policies at the Bank of Japan (BoJ). The current monetary policies were supported in Ueda’s most recent public address.

The market’s pricing of fewer rate hikes and a nearer peak seemed to weigh on rates on U.S. Treasuries while Fed hawks defended worries about rate hikes. U.S. 10-year Treasury note yields fell nearly two basis points from a monthly high the day before to 3.69%.

The rekindled fears of balloon shootings between the U.S. and China sent the USD/JPY down. U.S. Senate Majority Leader Chuck Schumer has announced that lawmakers from both parties will investigate UFOs that have entered American and Canadian airspace and determine why they were not discovered earlier. A US military general had dismissed the possibility that China was responsible for the downed “unidentified objects” during the weekend.

As of press time, the Nikkei 225 in Japan had up 0.65% during the trading day, reaching 27,600, while S&P 500 Futures were down.

Trade Idea

Next, the market consensus expects the January US CPI to come in at 6.2% YoY. But, there is a good chance of a positive surprise at the beginning of the year, which puts USD/JPY bears on edge.