Underperforms Dollar Weakness, USD/JPY Wedge With Yield Differentials Widens

USD/JPY tracks in the 156.40/45 region in early Wednesday dealings, close to where we were late on Tuesday in Asia Pac trade. We saw a brief spike to 156.74 on the higher US PPI print, but there was no follow through. Broader USD sentiment and yields finished Tuesday's NY session lower. Yen still lagged these broader trends, losing 0.13%, the weakest performer in the G10.

• Upside focus on USD/JPY remains on 157.00 round figure resistance, which is also 61.8% retracement of the Apr 29 - May 3 sell-off. On the downside the 20-day EMA sits back near 155.00.
• Focus in US trade was on the PPI print, with the higher-than-expected ex-food and energy prints (0.5% vs. Exp. 0.2% M/M, 2.4% vs. Exp. 2.3% Y/Y) triggering some USD strength. This price action swiftly reversed, however, as details in the PPI report showed negative revisions to the March data and few ramifications for PCE.
• In the cross asset space, US yields finished 4-5.4bps lower, which drives a further wedge between USD/JPY and US-JP relative yield differentials. Weighing on the yen from a cross standpoint was the better US equity tone (SPX +0.48%) though. Upside in EUR/JPY remains a focus point.
• The local data calendar is empty today, while Q1 GDP prints tomorrow. In the FX option expiry space not ethe following for NY cut later: Y155.50-60($510mln), Y156.00(1.2bln).