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USD/JPY holds a bit higher to start the new week

With the focus still on the bond market, the yen remains a fairly sensitive currency for the time being in trade. Bond selling is still ongoing, with 2-year Treasury yields hitting 2.50% earlier for the first time since early 2019.

Curve flattening also continues to occur with 2s10 firmly inverted now around -6bps and also 2s30 which is seen at -0.4bps currently. Typically, this portends a recession to come in the next 1-2 years, but so far the market is taking matters into its own hands as risk tones hold a little firmer ahead of European trade.

Looking to USD/JPY, the pair will be looking to see what comes next after hitting the key 125.00 level in March. Since the slight pullback, there has been some stability as buyers look to regain some bullish momentum, but have so far struggled to break above the 123.00 level.

The short-term chart underscores this sentiment:

USD/JPY holds a bit higher to start the new week

Price action is seen above the 100 and 200 hourly moving averages at 122.23-34, so the buyers are in control in the near term. However, there still seems to be a lack of momentum or will to extend the move higher towards the key resistance at 125.00. For now, even the 123.00 level offers minor resistance.

There is a lack of conviction as we move things forward this week, but above all, keep the focus on risk sentiment and bond yields as these will continue to be the main drivers of trading this week.

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