USD/JPY prints five-day downtrend around 110.50 even as US Treasury yields dribble

• USD/JPY holds lower ground, drops for the fifth consecutive day.
• Coronavirus woes, mixed Fedspeak weigh on the quote ahead of US ADP.
• Japan calendar prints came out positive but gained fewer accolades.
• Risk catalysts keep the driver’s seat, Delta variant gets more attention.

USD/JPY remains pressured around 110.50, down 0.05% intraday, heading into Wednesday’s European session. In doing so, the yen pair drops for the fifth consecutive day amid sluggish markets.

The cautious sentiment ahead of the US ADP Employment Change and the coronavirus (COVID-19) concerns seem to occupy the front seat while sluggish Treasury yields and no reaction to the Japanese data restrict the pair’s moves. That said, Fedspeak and US President Joe Biden’s push for regulations over the giant companies also weigh on the USD/JPY prices.

Strong points of Tuesday’s US CB Consumer Confidence and housing market numbers mark another signal in favor of strong inflation and raise challenges for the US Federal Reserve (Fed) policymakers’ defense to the easy money policy. Recently, Fed Governor Christopher Waller probed the risk-on mood in a Bloomberg TV interview by saying, “Inflation expectations seem anchored.”

The Delta variant of the coronavirus (COVID-19) has been detrimental for the UK and Australia of late. While the UK has already pushed back unlock plans, Australia called for local lockdowns covering over 80% of the Oz nation’s population. At home, Japan announced a donation of one million covid vaccine doses, per Kyodo News, while also planning to take the Olympic torch relay off the public roads.

The Wall Street Journal’s (WSJ) signal for further hardships to the globally big companies. “The Biden administration is developing an executive order directing agencies to strengthen oversight of industries that they perceive to be dominated by a small number of companies, a wide-ranging attempt to rein in big business power across the economy, according to people familiar with the plans,” said the news.

Amid these plays, stock futures remain mildly bid but the US Treasury yields seesaw around 1.48%, keeping the US dollar index (DXY) afloat near 92.00 by the press time.

Talking about the data, Japan’s preliminary Industrial Production for May jumped past the 20% forecast and 15.8% prior to 22% whereas Consumer Confidence Index for June crossed 34.3 expected and 34.1 previous readouts with 37.4 level.

While the cautious mood of the markets keeps USD/JPY sellers hopeful, stronger-than-expected 600K of the US ADP Employment Change for June can recall the buyers for a consolidation ahead of Friday’s Nonfarm Payrolls.

Read: ADP Nonfarm Payrolls Preview: Going contrarian? How to trade this leading indicator

Technical analysis

A clear downside past 10-DMA directs USD/JPY to early month tops surrounding 110.30 but the further downside will be questioned by the mid-May high near 109.80. On the flip side, recovery moves beyond the 10-DMA level of 110.55 may catch a breather around the June 17 peak of 110.82 before challenging the monthly high of 111.10.