USD/JPY Pulls Back On Lower US Yields, 20-day EMA At 138.64 In Focus

USD/JPY slumped sub 139.00 late in NY trade, the pair currently tracking around the 138.90 region. The yen gain 0.86% for Thursday's session, mid-range from a G10 standpoint as USD indices slumped. The US yield pullback amid the jobless claims spike aided the yen.

• The US-JP 10yr swap spread remains volatile, driven by the US leg. This spread last around +284bps, but the correlation with the USD/JPY remains firm, +77% for the past 2 weeks, +93% for the past month.
• Technically, conditions still remain bullish for the pair, although we aren't too far away from the 20-day EMA, which comes in at 138.64. On the topside, the pair continues to trade just ahead of key resistance at the top of a bull channel drawn from the Jan 16 low. The top intersects at 141.11 today.
• The local data calendar just has May money stock data on tap today, which is unlikely to move market sentiment.
• Locally, there is focus on whether PM Kishida will call an early election, potentially in July or August (see this link for more details). Fitch also noted prohibitive hedging costs were reducing the appeal of overseas bonds for Japan investors, a well-worn theme in markets this year (see this link).