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Rising Core Yields Bolster USDJPY Recovery

JPY
  • Following USDJPY printing a new marginal low for the week at 139.03, the pair has had a sharp turnaround, rising back above the 140 handle in most recent trade, underpinned by the renewed pressure on core rates.
  • Assisted by the BOC’s hawkish surprise, US yields have climbed between 10-15bps across the curve, with the hawkishness also boosting the implied cumulative hiking priced for the ECB and BoE by 3bp / 7bp respectively, to fresh June highs.
  • With yield differentials widening, the Japanese Yen has suffered with USDJPY rising as much as 120 pips from the lows to print 140.23 in recent trade. However, it is worth noting that bounce places the pair broadly in line with Friday’s close, on a week with no significant tier-one data releases. All eyes remain focused on the US CPI print next week, which precedes the June FOMC decision.
  • Trend conditions in USDJPY remains bullish. Attention is on key resistance at the top of a bull channel, drawn from the Jan 16 low, which intersects at 141.11 today. A clear break of this level would reinforce a bullish theme and open 141.61, the Nov 23 2022 high. Key support to watch is 138.45, the 20-day EMA.
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