USD/JPY Back Above Y109.00 Into London

Pressure on the U.S./Japan 10-Year real yield differential and last week's worry surrounding the Chinese regulatory clampdown has allowed USD/JPY to trade as low as Y108.88 in recent sessions, with the rate virtually unchanged at Y109.05 into European dealing. The cross stuck to a very narrow 18-pip range in Tokyo hours, holding within the confines of yesterday's range.

• Tuesday's defensive start for U.S. equity markets saw the rate print as low as the aforementioned Y108.88 level, before a recovery in risk appetite led the rate back above Y109.00.
• Wednesday will be dominated by the U.S. risk events that we have outlined elsewhere, which will likely shape the broader risk and yield dynamics.
• There is nothing in the way of notable nearby FX option expiries to be concerned with at today's 10AM NY cut.
• Initial technical support is now seen at the May 25 low (Y108.56), which protects a zone of support focused on the 76.4% retracement of the Apr 23 to July 2 rally and May 7 low (Y108.47/34). Initial resistance isn't noted until the July 23 high (Y110.59)