Cycle Highs In Sight For USD/JPY, Data Galore Today

USD/JPY added a handful of pips Tuesday as the impact of firmer U.S. Tsy yields prevailed. Still, the yen fared well amid relatively fragile risk sentiment.

• Data beats in the U.S. (consumer confidence & JOLTS) boosted hawkish Fed expectations, sending U.S. Tsy yields higher and allowing the greenback to more than erase its earlier losses.
• With U.S. Tsys faltering, U.S./Japan 10-Year yield spread widened ~2bp, while 2-Year gap was up ~3bp come the end of the day.
• U.S. equity benchmarks retreated, while the VIX index climbed. A poor showing on Wall Street may have generated some demand for safer currencies, albeit the CHF traded on a softer footing.
• Spot USD/JPY trades at Y138.78, little changed on the day, after a foray above the Y139.00 mark yesterday. The next topside target is provided by Jul 14 cycle high/round figure of Y139.39/140.00. Bears look for a dip through Aug 23 low of Y135.82.
• Japan's data dump today includes flash industrial output, retail sales, consumer confidence & housing starts.