USD/JPY To Fresh Highs, As Core Yields Surge

USD/JPY's post Asia close trend was mostly positive, albeit with some volatility. The pair got as high as 135.23, before pulling lower towards 134.70. We sit around 135.00 currently, around 0.55% weaker in yen terms for Tuesday's session. Yen wasn't the weakest performer in the G10 space, but USD gains were broad based. USD/JPY is above the 100 day EMA (134.75) and back to highs from late Dec last year.

• Better PMI data drove core yields higher, with only GBP outperforming. The notable beats were on the services side, which moved back into expansion territory for the US. The US-JP 10 swap spread is now back to +282bps, versus +269bps at the end of last week.
• This continues to point to upside momentum in USD/JPY. Upside targets now rest at 135.31, a vol resistance band, and then 136.38. Beyond that, pre BoJ levels from late December, which come in close to 137.50, may also come into play.
• There may be more resistance ahead of such levels (prior to when the BoJ shifted the YCC parameters) given expectations around the medium term BoJ outlook. Yesterday the 10yr government bond yield breached the 0.50% level for the first time since January.
• The movement in core yields through Tuesday's session will likely add to such pressures, while Friday is new BoJ Governor Ueda's confirmation hearing in parliament. The local data calendar just has PPI services on tap today. BoJ's Tamura also speaks.