Yen Gives Away Some Gains After Hitting Two-Week High On Friday

USD/JPY is chewing into the prior trading day's losses, last trading +26 pips at Y136.38. The bulk of the pair's losses last week were due to a dynamic two-day downswing on Thursday/Friday, which coincided with a retreat in U.S. Tsy yields.

• USD/JPY 1-month risk reversal was knocked off multi-week highs on Friday, falling to its worst levels since Jul 14. It still operates near these levels as the new week gets underway.
• The yen drew support from a poor session on Wall St. on Friday, with a downtick in e-mini futures this morning suggesting that pain may not be over.
• From a technical perspective, the key near-term bearish target is provided by Y134.27, the low print of Jun 23. Bulls look for a rebound above Jul 21 high of Y138.88, followed by Jul 14 high/round figure of Y139.39/140.00.
• The Sakurajima volcano on the Kyushu island erupted on Sunday, prompting the authorities to announce the highest alert level and issue evacuation orders to people within 2 miles from the main craters.
• Looking ahead, Friday will see a data dump that will include Tokyo CPI, unemployment, retail sales & flash industrial output. Elsewhere, the minutes of the BoJ's June monetary policy meeting will be published on Tuesday, with the summary of opinions from the July meeting coming up Friday.
• Worth noting that two new members of the BoJ's Policy Board began their five-year terms on Sunday. In the most closely watched replacement, centrist economist Hajime Takata has filled the vacancy left by most outspoken reflationist Goushi Kataoka, the usual dovish dissenter at Board meetings. Elsewhere, veteran banker Naoki Tamura has replaced Hitoshi Suzuki.