USD/JPY Recoups Earlier Friday Losses, Back Close To Cyclical Highs, BoJ This Week's Focus

USD/JPY recouped all of its earlier Friday losses by the end of NY trade. From lows just under 153.60 we climbed back above 154.60. We track just under this level in early Monday trade. The yen was unchanged for Friday's session, with mixed G10 trends. The BBDXY finished marginally higher at 1264.37.

• Yen's safe haven bid on Friday, post headlines of an Israel strike on Iran, lost impetus as the session progressed. Markets appeared to take comfort from the fact that the action appeared limited in nature and closer to a warning shot rather than a declaration of protracted hostilities.
• Technically, the backdrop for USD/JPY hasn't changed. Recent gains have confirmed a resumption of the primary uptrend and this maintains the bullish price sequence of higher highs and higher lows. The trend is overbought, however, this is clearly not a concern for bulls at this stage. Moving average studies are in a bull mode position too. Sights are on the 155.00 handle next. Support lies at 152.55, 20-day EMA.
• In the cross asset space, US yields recouped earlier Friday losses to finish close to unchanged, while climbing around 10bps for both the 2yr and 10yr Tsy yields last week. Weaker equity sentiment persisted though, particularly in the tech space, which may have aided the yen on crosses at the margin.
• The local data calendar is empty today, with focus this week on Friday's BoJ outcome. No major changes are envisaged at the meeting. Our Tokyo policy team noted on Friday the central bank could cut JGB buying in July (see this link for more details). This, the weak yen and its impact on inflation, coupled with scope for follow up BoJ rate hikes, are likely to be the main focus points.