USD/JPY Trims Initial Gains Amid Wider Defensive Tone
USD/JPY re-opened on a slightly firmer footing but has now given back the bulk of initial gains, with risk-off tone from over the weekend lingering. The declaration from Chinese health officials who pledged to "unswervingly" stick to the COVID Zero policy has undermined market sentiment, generating greenback outperformance, with safe haven peers JPY and CHF close behind.
- All three main e-mini contracts operate in the red (0.6%-0.9% lower on the day), after a positive Wall Street session last Friday.
- U.S. Tsy curve has twist flattened at the margin, with U.S./Japan 2-year yield spread last 1.3bp wider & 10-year differential 2.0bp tighter.
- Spot USD/JPY last +27 pips at Y146.88. The key topside target is Y151.95, a multi-decade high printed on Oct 21. Bears look for losses towards the 50-DMA/Oct 27 low at Y145.12/145.11.
- Focus turns to Japanese earnings/spending data & summary of opinions from the BoJ's most recent monetary policy meeting (Tuesday), as well as BoP current account balance & Eco Watchers Survey (Wednesday).