August 16, 2022 22:59 GMT
USD/JPY crept higher Tuesday amid twist flattening in U.S. Tsy yield curve, with safer currencies (JPY, CHF) struggling to find poise.
- The gap between yields on 10-year U.S. Tsys and JGBs widened ~3bp, while 2-year spread rose ~8bp.
- A generally positive showing from equity markets post-Asia reduced demand for safe havens. The VIX index ground lower.
- USD/JPY risk reversals advanced, with one-year skews printing best levels since mid-May as they consolidated above par.
- Spot USD/JPY last sits at Y134.29, up 7 pips on the day. Should we get above Aug 8 high of Y135.58, bulls could take aim at Y135.96, the 61.8% retracement of the Jul 14 - Aug 2 sell-off. Bears look for a dip under Aug 11 low of Y131.74.
- Japan's trade deficit is expected to have shrunk to Y1.3625tn in Jul from Y1.3985tn prior, according to a Bloomberg survey of analysts. Core machine orders will also cross the wires today.
- Looking further afield, Japan's national CPI figures will be published this Friday.