USD/JPY Tests Monday Lows, Outperforms On Crosses

USD/JPY continues it's downward slide, the pair now off 0.45% for the session, last near 156.30/35. This is just up from earlier lows of 156.20 (which were under Intra-session lows from Monday). The next downside target is the July 18 low at 155.38.

• Cross asset trends are supporting the yen, with US equity futures lower, while some regional equity markets are struggling as well, most notably China (CSI 300 off 1%), which is likely weighing on higher beta FX against the yen.
• AUD/JPY is back to 103.70/75, while NZD/JPY is around 93.30, both pairs near session lows.
• In the yield space, US Tsy yields have ticked down, 1-1.6bps, another support point for the yen. Combined with a slightly firmer JGB yield backdrop has helped push yields differential with the US down a touch.
• In the options space, volumes are slightly below averages typically seen for this time of day. The 1 month risk reversal is at -1.58, so in the bottom part of this year's trading range, albeit up from recent lows.
• 1 week and 1 month implied vols are up a touch but remain well below 2024 highs.