Steadier US Yield Backdrop Halts USD/JPY Rebound

USD/JPY tracked lower post the Asia close but found support sub 134.00. We currently sit in the 134.05/10 region. For Tuesday's session the yen gained just over 0.25%, towards the bottom end in terms of G10 performance against the USD (DXY -0.40%). The steadier yield backdrop in the US has helped stall the upside bias in the pair, albeit with the short term technicals still skewed higher.

• Resistance at 134.05, the Apr 12 high has been topped. This signals potential for a continuation higher and the pair is approaching 134.75, a Fibonacci retracement point. The current bull cycle does appear to be a correction. However, a break of support at 132.02, the Apr 13 low, is required to signal a bearish reversal.
• USD/JPY risk reversals remain above recent lows sub -2.00, last tracking at -1.60. Implied vols in the 1 month space have stabilized around recent lows, just under 11%. This is very much in line with the lower risk aversion in the equity space.
• On the data front today, capacity utilization for Feb, along with final IP readings for Feb are also on tap. Prior IP y/y was -0.6%. These releases are unlikely to shift market sentiment.