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Struggling To Recover After Friday Rout

JPY

Spot USD/JPY turned bid last Friday as an expectation-busting U.S. NFP report fanned Fed rate-hike expectations. The rate closed just above the Y135.00 mark, recording its best week in three thanks to the post-NFP gains.

  • The data sent U.S. Tsy yields soaring, which drove notable widening in their spread with Japanese counterparts. U.S./Japan 10-year yield gap grew ~15bp to levels last seen on Jul 21.
  • The equity space struggled post-Asia but the VIX index slipped. The Nikkei 225 futures point to a marginally lower re-open today.
  • USD/JPY 1-month risk reversal crept higher on Friday, printing its best levels since Jun 13, when it dived into negative territory.
  • In domestic news, local media outlets reported that PM Kishida is planning to announce a Cabinet reshuffle as soon as this Wednesday.
  • Spot USD/JPY trades at Y135.04 at typing, a touch higher on the day. A sustained break above the 50-DMA (Y135.03) would allow bulls to take aim at Jul 27 high of Y137.46. Bears would be pleased by a retreat under the 100-DMA/Aug 2 low at Y130.87/41.
  • Looking ahead, Japan's BoP & Eco Watchers survey headline the data docket today.
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