USDJPY impressive rally starting on May month-end has taken the pair over 2.5% higher in a short period of time This has been primarily on the back of higher US yields (having bounced off the 2.70% level in 10y), generally positive risk sentiment, and likely local buying of USD from importers due to higher energy prices.
Ahead of US May CPI data on Friday, USDJPY is close to re-testing the 131.25/35 high from earlier this year, where there is currently a double top. A break above is likely to see model and momentum players buy USD, but dips are likely to be supported even before Friday.
The first level to watch on the downside is 130.00/25, followed by the 129.50 area. Buying dips makes sense.
EURJPY broke up through 140.00 last week, touching a high of 140.62 overnight. Dips into 139,50 should find support in the short term, especially with the ECB decision on Thursday, where the market is expecting a hawkish lean. - UBS Strategy
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