The main theme in today's holiday-thinned FX trade is yen weakness. It's a reversal from the trend late last week, where the yen was ascendant.

The pattern on the USD/JPY chart is a bit of a three-candle reversal, although there's still some work to do today.


The pair is up 37 pips to 114.57.

What the next move will hinge on is Treasury yields and the overall risk environment. The US bond market isn't trading today but on Friday, US 10s pushed up close to 1.80% once again. If it can get through that range, it clears the way for a test of 2% and that could quickly get USD/JPY back to the recent highs.

US 10 year yields

We're into the quiet period ahead of the January 26 FOMC decision so the bond market might stay cool for a time but we're also into the start of earnings season and I suspect that inflation will be high on the agenda in corporate conference calls. That could filter back through the market and push up yields.