One day of risk aversion does not make a trend, But ....

Commodity currencies like NOK, CAD, and NZD lead the rebound versus USD in G10 FX while EUR and AUD are lagging. Dovish expectation heading into the ECB meeting on Thursday explains the underperformance of EUR. Meanwhile, AUD is weighed by its lockdown and lower growth concerns.

One day of risk aversion does not make a trend. Consequently, USDJPY could not sustain its downside momentum from Monday as US yields and equities rallied yesterday and overnight. The pair has pushed up through 110.00 in early European trading to touch a high of 110.18. 110.40/50 now becomes resistance, followed by 110.70. 109.00/10 seems like a distant memory, but the  Delta variant concerns that pushed risk markets lower to start the week have not gone away. Additionally, USDJPY gains from 110.10/20 should be harder to come by unless US yields/equities can make meaningful headway higher. Reducing shorts on the break back above 110.00 makes sense. Cross JPY has also bounced, with USDJPY doing the heavy lifting. 130.00/30 should cap the topside in EURJPY ahead of tomorrow's ECB decision. Japan is out on holiday for the rest of the week, so the price action during the Asian session should be more muted than usual.