USD/JPY Keeps Pushing Higher Ahead Of Jackson Hole

An upswing in U.S. Tsy yields pushed USD/JPY higher on Monday as participants were preparing for this week's Jackson Hole symposium.

• The rate erased earlier gains towards the end of the Tokyo session but then turned bid anew as the London session kicked off. It ran as high as to Y137.65 over the WMR fix and stabilised near that level thereafter.
• Equity sentiment was negative but this wasn't enough to generate yen outperformance as yield dynamics took precedence. For the record, benchmark stock indices traded in the red, while the VIX index soared to new monthly highs.
• U.S./Japan 2-year yield spread widened ~7bp on Monday and the gap between 10-year yields grew ~2bp.
• Option skews shifted further in favour of JPY puts. This allowed risk reversals to consolidate above par, across the maturity curve.
• The technical picture remains bullish after the rate bounced off its 100-DMA/23.6% retracement of the 2020 - 2022 rally and proceeded to chart a short-term double bottom pattern completed last week.
• The spot rate last sits at Y137.51, barely changed on the day. Bullish focus falls on Y139.39, a cyclical high printed on Jul 14. Bears need a dip through the 100-DMA (Y132.26) to get some reprieve before targeting Aug 2 low/aforesaid Fibo level at Y130.41/37.
• BoJ's Nakamura will speak on Thursday before the release of the latest set of Tokyo CPI figures on Friday.