USD/JPY Back Sub 140.00 On US Yield Pullback

USD/JPY pulled back from highs near 140.50 late in Asia Pac trade yesterday to 139.25 in the NY session on Monday. We found some support at this level, moving back to 139.80/85, before settling back at 139.50/55 by the close, which is where we currently track. This left yen 0.24% firmer for Monday's session, only outperformed by CHF in the G10 space.

• The yen rebound coincided with a pull back in US yields, as US data printed weaker than expected, led by the ISM services print. From highs above 4.57%, the 2yr slipped back to the low 4.40% region, before ending close to 4.465% in NY trade.
• From a technical standpoint, bullish conditions remain intact with pullbacks appearing to be corrective at this juncture. Recent highs resulted in a test of the top of a bull channel, drawn from the Jan 16 low which intersects at 141.01 today and represents a key resistance. A clear break of it would reinforce bullish conditions and open 141.61, the Nov 23 2022 high. Key support to watch is 138.20, the 20-day EMA.
• In the vol space, we are just under 9.84% for the 1 month implied, not too far from recent lows. The 1 month risk reversal is -1.2625, maintaining its bounce since the start of the month. Next week's BoJ meeting is starting to come into view (Fri the 16th).
• On the data calendar today we have Apr Labor cash earnings. The market forecast is 1.8% y/y (nominal), versus 1.3% prior, while real earnings are projected at -2.0%y/y (prior -2.3%). Household spending is also out, -2.4% y/y is the market projection, -1.9% is the prior.