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USD/JPY Makes Fresh Highs Before Sharp Pullback, Dips Supported By Higher US Yields

JPY

Post the Asia close on Tuesday, USD/JPY got to fresh cyclical highs in the 154.75/80 region. We did see a brief sharp pull back towards 154.00, but this dip was supported (tracking near 154.70 in early Wednesday trade). It's worth recalling we have had sharp intraday corrections in USD/JPY in recent months, that turned out *not* to be official intervention. No doubt though this will remain a market focus point though.

  • For USD/JPY little has changed in terms of the technical backdrop, with sights on 155.00. Initial firm support lies at 151.84, the 20-day EMA.
  • Broader USD gains persisted in Tuesday trade, the BBDXY up a further 0.36% to 1266.18. Yen lost just under 0.30% to be around mid-range from a G10 performance standpoint. Higher beta plays saw the larger drops (AUD off 0.60%), while EUR was close to flat.
  • Global equity sentiment remained soft, which likely weighed on higher beta G10 FX.
  • Treasuries finished near late session lows, 10Y yield tapping 4.6943% high (mid-Nov'23 level) following Fed Chairman Powell's "lack of further progress on inflation" comment as he participated in a moderated chat with BoC head Macklem in the US afternoon session on Tuesday.
  • US-JP yield differentials remain skewed higher. The 10yr spread pressing towards +380bps.
  • On the data front today we have the Mar trade balance figures. In the option expiry space, note the following for NY cut later: Y153.50($681mln).
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