After hitting highs just above 131.00 in late April and early May, the pair has retreated as bond yields have fallen over the past three weeks. It was a much needed break after a fairly relentless push from 116.00 all the way to 130.00 for the pair.
But as bond yields rise this week amid a refocus on inflation, we see USD/JPY rising as well.
The pair tested the waters below support around 126.94-02 last week, but buyers intervened strongly in recent sessions to justify buying lower near the 127.00 level.
From a technical standpoint, there are few barriers to a move back towards 130.00 for the pair now. That said, the bond market continues to hold the cards here, so watch out for moves in this space. For now, Treasury yields continue to rise with 10-year yields up another 2.5 basis points to 2.87% on the day.