USD/JPY Rebounds With US Yields, 1 Week Vol Higher, But Well Below 2023 Peaks

USD/JPY rebounded sharply during Friday's NY session, as US yields recovered on better than expected PMI data. From lows around 133.55 we got back to 134.50, before moving back closer to 134.00 by the close, which is where we sit in early trade today.

• The near term technical outlook still looks skewed to the upside, after last week's break of resistance at 134.75. The break strengthens the current bull cycle and signals scope for an extension towards 135.96 next, the 76.4% retracement. Initial firm support lies at 133.32, the 20-day EMA.
• The local data calendar is quiet today. We kick back into gear tomorrow with the March PPI due.
• Over the weekend, Prime Minister Kishida's ruling LDP party won four out of five by-elections held on Sunday. Local wires report that the results could see Kishida call an early election potentially after Japan hosts the G7 summit in May (19-21).
• Local wires also reported that the BoJ is preparing to review its policy settings from the past few decades, with discussions reportedly set to kick off at this week's policy meeting (27-28 of April).
• In the vol space, 1 week implied are trending higher, last around 12.65%. We remain well below previous 2023 highs though. We are much calmer in the 1 month space though (10.67%).
• Risk reversals have fallen ahead of the BoJ meeting outcome this Friday, the week back to -3.24, while the 1 month is back to -1.75.