Fresh Cycle Highs Seen In USD/JPY, Though Follow Through Lacking

USD/JPY has failed to extend higher after registering a fresh cycle high during early Tokyo trade, last dealing little changed at Y111.13, just 3 pips shy of best levels, with a modest downtick in domestic equities and muted session for U.S. Tsys crimping activity, even as the USD nudged higher against the bulk of its G10 counterparts. Note that USD/JPY was not exempt from the broader swings in the DXY during Wednesday's NY session that we have outlined previously.

• The Q2 BoJ Tankan survey disappointed across the board, excluding a larger than expected uptick in the CapEx plans amongst large firms. The remainder of the metrics covering large firms represented firmer prints vs. Q1, although disappointed vs. consensus, while the major metrics covering small firms weren't quite as negative as the corresponding Q1 readings, but still disappointed vs. broader exp. Firms continue to see very moderate inflationary pressures over a 5 year horizon.
• Technically Y111.30 (the Mar 26 '20 high) presents the next upside hurdle, with the bull trend well and truly intact. Above Y111.30 would open the way to Y111.71/73 (the Mar 24 '20 high/1.0% 10-DMA envelope). Initial support is seen at Y110.42 (the Jun 30 low).
• There is lack of meaningful option expiries at today's 10AM NY cut, although the coming days will see plenty of interest rolling off between Y109.40 and Y111.00.
• The latest round of BoJ Rinban operations (covering 1- to 5- and 10- to 25-Year JGBs) headline the local docket on Friday.