USD/JPY Close To YTD Highs, Risk Reversals Not Trending Higher

Yen was the weakest performer in the G10 space for Wednesday's session. It lost nearly 1% against the USD, leaving USD/JPY not too far off YTD highs. The pair last around 137.55/60, just below late NY session highs from Wednesday. The May 2 high is nearby at 137.77, while the Mar 8 high of 137.91 (the YTD high) is also within reach.

• A break of this resistance zone would strengthen bullish conditions. On the downside, initial firm support is seen at 134.96, the 20-day EMA.
• Yen was hit by the combination of a further rise in US yields, which remains led by the front end (2yr to 4.15%), and improved risk appetite in the equity space. Major equity benchmarks rallied, underpinned by post-Biden-Congressional leadership meeting rhetoric pointing to some limited positive developments.
• On the data calendar today we have Apr trade balance figures, with the market looking for a slightly lower deficit compared to March, mainly due to weaker import growth. Weekly investment flow figures also print.
• Despite the rally in USD/JPY spot, 1 month risk reversals remain fairly benign, last at -1.59, well below early YTD highs. Implied vols are also well behaved, last close to 10.16%, not too far above YTD lows.