USD/JPY Rebounds, But Yen Outperforms In G10 Space, Tokyo CPI Due Today

USD/JPY firmed off earlier Monday lows, with most gains coming in US trade. From around the 146.50 region, we spiked to 147.45, as broader USD sentiment continued to recover. The pair tracks near 147.20 in early Tuesday Asia Pac trade, with the yen losing 0.26% for Monday's session, albeit the best relative performer in the G10 space (BBDXY +0.48%).

• Like elsewhere in the FX space, the yen was weighed down by the firmer US yield backdrop and paring of early 2024 Fed rate cut expectations. US-JP 10yr yield differentials are back above +350bps.
• Yen relative outperformance was aided by some risk aversion which emerged in the equity space (on spill over from higher yields).
• From a technical standpoint, even with the bounce in USD/JPY from cyclical Monday lows, the focus remains on resumption of the bear cycle that started Nov 13.
• Attention is on a key support at 146.76, a trendline drawn from the Mar 24 low. A clear break would signal a stronger reversal and open 145.91, the Sep 11 low. Key short-term resistance to watch is 148.51, the Nov 30 high.
• The local focus today will be on the Tokyo Nov CPI print. The market expects headline at 3.0% y/y (prior 3.2%), core ex fresh food and energy is projected at 3.7% y/y (prior 3.8%).
• Also be mindful of the some nearby option expiries for NY cut on Tuesday (per DTCC/BBG): 148.00 ($1.77b), 147.50 ($1.42b), 147.00 ($940.8m).