USD/JPY nearly retested July's 110.58 low overnight as EM-led derisking sent Treasury yields down faster than JGBs after above-forecast Japan GDP, but the bigger yen story remains against EUR and other non-haven currencies. Pressure on EUR/JPY is likely to persist due to doubts about Turkey's ill-defined economic stabilization plans nI7N1UR017, the TRY's implosion and Trump's call to double metals tariffs on Turkey nL1N1V10IN.
USD/JPY buying, some linked to the broader USD index breakout to its highest level in a year, likely limits USD/JPY downside to roughly 110, even if stops below 110.50 are finally hit and dislodge more IMM spec longs.
EUR/JPY is down 1 percent and threatening to break the weekly cloud base 126.19.
That base reversed the May slide that was driven by Italian political fears, which sent the 10-year BTP-Bund yield spread 168bp above April's lows.
Those spreads are up 11bp today at 263bp and nearing the 283bp May 29 peak.
If EUR/JPY closes below the weekly Cloud base at 126.19, a retest of May's 124.62 low will be in play, with 50% of the 2016-18 rise at 123.41 a secondary target.