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USD/JPY Rebounds Back Above 130.00, But Focus Remains On The Downside

JPY

The yen was the only G10 currency to rise against the USD through Friday's session, albeit with a modest 0.09% gain. USD/JPY hit lows not long after the end of APAC session on Friday, with lows coming in around 129.60/65 region. The pair rallied back to 130.90, before closing in the 130.70/75 area. We start today slightly softer, the pair under 130.60.

  • Core yields finished lower for Friday's session, which helped yen outperformance, but US yields finished up off session lows, which coincided with USD/JPY moving higher (back above 130.00). The rebound in US equities (after a softer start on Friday) also likely helped trim yen gains as well.
  • Still, the focus remains on downside for the pair. In terms of technicals, price action has pierced 129.75, 76.4% of the Jan 16 - Mar 8 rally. A clear break would open 129.12, the Feb 2 low. Firm resistance is seen at the 20-day EMA, at 133.43 where a break is required to ease bearish pressure.
  • US-JP 10yr swap spreads are back to +248bps, down around 7bps through last week. Developments in the US, around the banking sector and Fed continue to drive the spread from the US leg side.
  • Today we have the PPI services print for Feb, +1.7% y/y forecast (1.6% prior). Later on, the leading and coincident indices for Jan (final readings are out).
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