USD/JPY Back Close To 136.00, Implieds Move Higher Ahead Of Key Event Risks

USD/JPY spent most of Monday's post Asia close recovering. We got back towards the 136.20 level before gains were curbed. The pair finished the NY session close to 136.00, which is where we currently sit. This left the yen slightly down for the first session of the week, outperforming higher beta plays (especially AUD and NZD), but losing ground against the EUR.

• The USD found support as yields recouped losses as Monday's session progressed. The 10yr cash Tsy yield moved back to 3.99% from earlier lows near 3.89%. In the swap space, the 10yr US-JP spread is now around +286bps, still down slightly from Friday closing levels at +287bps.
• On the data front today is Jan labor cash earnings. The market expects a +1.8% y/y print, versus +4.1% prior. Real earnings are expected at -3.2% y/y, from -0.6% prior.
• We are starting to see higher implied vol levels, with the 1 wk rising to 15.60% for USD/JPY. We have the BoJ meeting this Friday, along with payrolls in the US as well. Near term focus will rest on Fed Chair Powell's Senate testimony, later today in the US.
• The skew in risk reversals has also shifted noticeably. The 1 week down to -3.70, the 1 month to -1.92, with both metrics around multi-month lows.