Can USD/JPY buyers break out to the upside?
With large expiries rolling off at the 110.00 handle today, price action has been playing ping pong around the figure level since late Friday trading but with bond yields holding steady we're starting to see a bit of a breakout as the pair hits a session high of 110.23.
This comes after the release of the German Ifo data, which beat expectations, that helped to lift 10-year bund yields above 0% briefly. But in general, bonds are in a much calmer mood today with yields not really slumping despite equities showing a bit more nervous sentiment.
Of note, Treasury yields are holding up well with 10-year yields up by 3 bps to 2.47% currently and that is also helping to underpin yen pairs in European morning trade so far.
As mentioned earlier, currencies are very much taking a cue from bonds at the moment and eventually traders will have to decide on a narrative to follow today. The German data release gives a vote in favour of bonds so let's see how will equities respond now.
Update: Germany's DAX pares losses to be flat on the day now with US equity futures also paring losses to just 0.2%. We could be seeing the start of a more positive risk turn here but just be wary that sentiment remains rather cautious still.
