Rising Treasury yields and an improving risk mood are backstopping a 100-pip gain in USD/JPY to start the week, pushing the pair to 131.70.
It's tough to see further downside in USD/JPY without another negative US shock, I wrote on Friday. The argument was that the market was too aggressive in pricing in rate hikes and we've seen some of that reverse today with US 2-year yields up 19.5 bps to 3.97%. The banking sector continues to clean up the mess from SVB with some assets sold today. That's a great catalyst on top of stabilization elsewhere. Reports on the weekend highlighted that deposit outflows from First Republic have slowed and that regulators are more optimistic.
Technically, a close above 131.66 today would put something of a three-candle reversal on the chart and increase confidence for longs.
