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Higher Core Rates Place Renewed Pressure on Japanese Yen

JPY
  • Pressure on core front-end rates placed the Japanese Yen towards the bottom of the G10 pile on Monday. USDJPY has recovered the entirety of Friday’s sharp decline and the pair has spent the majority of late session consolidating around 138.50.
  • Price actions reaffirms that bullish conditions remain intact following last weeks’ strong gains. A key resistance zone between 137.77-91, the May 2 and Mar 8 high respectively, has been cleared.
  • The break strengthens bullish conditions and confirms a resumption of the uptrend that started on Jan 16. The focus is on 139.00 and 139.59, a Fibonacci retracement. Initial firm support is seen at 135.78, the 20-day EMA.
  • Reminder of a story overnight - Ex-Bank of Japan Chief Economist Toshitaka Sekine believes a window to raise the target for the 10-year bond yield could open as early as the Bank's June 15-16 meeting. The BOJ could raise its target rate to around 1% from about 0% and widen the acceptable yield range to between plus and minus 100bp at the policy-setting meeting, said Sekine.
  • The economic data highlight this week will be the timelier Tokyo May CPI on Friday. Recent national figures indicated that Japan's prices picked up in April after a period of cooling earlier in the year.
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