USD/JPY bulls look set to continue riding the wave of a widening 10-year UST-JGB yield spread with the U.S. bond yield breaching the 3% level today as crude oil prices rallied after U.S. President Donald Trump pulled out from an international nuclear deal with Iran nL3N1SG141.
The 10-year UST-JGB yield spread has been underpinning USD/JPY and that relationship is getting stronger.
The 30-day log correlation between USD/JPY and the spread has grown to +0.654, meaning the two variables register a close in the same direction more often than not.
USD/JPY was also boosted in Asia by the Tokyo fix and M&A flows related to Japan's Recruit plan to buy Glassdoor for USD 1.2 bln nL3N1SG16X.
The strong USD/JPY rise today has put the focus back on last week's 110.05 peak, a break above which will expose the 200-DMA at 110.19 and the 110.24 Fibonacci level -- 61.8% retrace of the 113.75 to 104.56 (December to March) fall.