USD/JPY has been quite a mover since the start of the week, with the dollar broadly weakening amid the risk rally and also the yen benefiting from the renewed track lower in Treasury yields after an attempted breakout last week following the blowout US jobs report.
On the latter, talk of the Fed looking towards yield curve control is arguably the main driver that is putting a cap on yields as we see 10-year Treasury yields now fall by over 2 bps on the session and is around 0.80% today - down 15 bps from the high on Friday:
The combination of that and a weaker dollar amid the risk rally is what is weighing on USD/JPY and the break under its key daily moving averages at 108.24-44 only served to accelerate the drop as sellers established a more bearish bias in the pair.
The dollar is continuing to stay weak in European morning trade today but nothing overly dramatic just yet, as all eyes are on the Fed for the time being.
For USD/JPY, the key support to watch out for now will be the 107.00 level before further support is then seen around the swing region closer to 106.75-80.
A lot will come down to the Fed's communication today and how hard of a line they want to draw on their forward guidance and commitment towards any form of yield curve control moving forward. That will set the tone for USD/JPY for the rest of the week.