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  • USD/JPY snapped a three-day winning run on Tuesday as both Treasury yields and the US stocks decline.
  • Dollar rally due to hawkish Fed minutes may be short-lived.
  • A close above 106.69 is needed to revive the bullish setup,

The USD/JPY pair snapped a three-day winning streak on Tuesday with a bearish engulfing candle, as the US treasury yields fell.

Notably, the US two-year Treasury yields dropped  from 1.52% to 1.49% on Tuesday and the benchmark 10-year yield from 1.59% to 1.55%.  The dip in yields likely weakened the bid tone around the US Dollar.

Further, the S&P 500 index also declined by 0.79%, ending a three-day winning run and strengthening the bid tone around the anti-risk JPY.

Focus on Fed minutes

The U.S. Federal Reserve will be releasing the  minutes  from the July Federal Open Market Committee (FOMC) meeting at 18:00 GMT today.

The Fed reduced rates by 25 basis points as expected in July, but Chairman Powell refrained from signaling additional easing.

The American Dollar may rise across the board if the minutes show the board members are reluctant to cut rates aggressively.

Markets, however, are unlikely to price out prospects of more easing before the year end even if the minutes sound hawkish. This is due to the fact that the central bank is under unprecedented political pressure to cut rates.

So, the US Dollar rally, if any, on hawkish minutes could be short-lived.

As of now, the pair is trading at 106.37, having hit a low of 106.16 in the overnight trade.

The minor recovery could be associated with the 0.17% gains in the S&P 500 futures. The US 10-year yield, however, remains flat lined around 1.56%.

The pair may rise further ahead of the Fed minutes if the equities regain poise.

Technical analysis

USD/JPY created a bearish engulfing candle on Tuesday, aborting the immediate bullish view. A bearish reversal would be confirmed if the pair closes today below 106.16 (Tuesday’s low).

On the other hand, a daily close above the bearish engulfing candle’s high of 106.69 is needed for bull revival.

Pivot points