JPY: USD/JPY Supported Sub 154.00, US-JP Yield Differentials Down Noticeably

USD/JPY is down around 0.40% for Monday's session, around mid-range from a G10 standpoint, as most currencies rallied against the USD for the session. We track near 154.20 in early Tuesday dealings, with Monday intra-session lows at 153.55 remaining intact. Post the Asia Pac close on Monday we were supported in the 153.60/70 region. Yen did outperform higher beta FX plays, with NOK down modestly and AUD close to flat for Monday's session. 

•  Broader USD indices finished down on Monday, the BBDXY off 0.50% to 1285, intra session lows coming in at 1282. US yields were down sharply, off 11-13bps in terms of the Tsy benchmarks. Carry over from the Bessent Tsy nomination, coupled with Israel-Hezbollah ceasefire prospects, which weighed on oil, contributed to the move.
• US-JP yield differentials have turned lower, particularly for the 10-yr tenor, see the chart below, although we likely see JGB yields respond to some degree today in terms of downside momentum.
• For USD/JPY downside focus will rest on the 20-day EMA, at 153.64. It has been pierced, a clear break of it would signal scope for a deeper short-term corrective pullback. Moving average studies are in a bull-mode position though highlighting a dominant uptrend and sights are on 156.88 next, a Fibonacci projection.
• Locally today we have the Oct services PPI on tap. The market expects a 2.5%y/y read, versus 2.6% prior.
• Note in the FX option expiry space the following for NY cut later: Y153.00($2.6bln), Y155.95-00($1.2bln).

Fig 1: USD/JPY Versus US-JP Yield Differentials