The story for USD/JPY continues to be one largely tied to the movement in bond yields, or more specifically Treasury yields. This is evident by the hourly chart below:
A rebound in 10-year yields back to near 4% is also leading a bounce in USD/JPY this week from 141.00 to 142.60 levels at the moment. Of note, we are seeing a push back above its 100-hour (red line) and 200-hour (blue line) moving averages with the latter coming today. That sees the near-term bias in the pair shift to being more bullish once again.
That being said, a lot of the recent bounce in USD/JPY and bond yields look to be a correction of sorts. That comes after a steady drop since November when the dollar seems to have peaked.
In the case of USD/JPY, the 200-day moving average at 143.11 is the key resistance level to watch at the moment. Keep below and sellers will hold the downside momentum but break above, and there is scope for the correction to extend further.
At some point, the BOJ will feature into the picture once again just as it did in December. Their next policy meeting falls on 23 January but the central bank still might not offer any signs of a pivot just yet, as policymakers have alluded to the spring wage negotiations in March/April before committing to anything.
But it is still a key risk event to be mindful of, especially since the Japanese yen has the makings to be one of the more interesting major currencies this year.