USD/JPY Edging Away From Recent Highs

A light downtick in U.S. Tsy yields and broader weakness in the USD has allowed USD/JPY to nudge away from recent highs in Tokyo dealing, with the cross last dealing ~15 pips lower on the day, printing ~Y114.15. A reminder that recent uptick in U.S. yields, coupled with the combination of surging energy prices and Japan's reliance on offshore fuel sources, pushed USD/JPY up to fresh multi-year highs (Y114.46) in recent sessions.

• Local Japanese news flow was particularly light on Tuesday.
• There isn't much in the way of notable FX option expiries to be aware of come today's 10AM NY cut.
• That leaves the broader risk tone and U.S. Tsy yield gyrations at the fore for the rate, in addition to energy price dynamics.
• Our technical analyst notes that USD/JPY is consolidating and remains firm. A strong bullish theme follows the break last week of a long-term trendline (at Y113.41) drawn off the December 1975 high. This marks a potentially significant breach and reinforces both the short and medium-term bullish outlook. Attention is on a vol band resistance (Y115.17). On the downside, initial firm support is seen at the Sep 30 high (Y112.08).