Heading into the last weekend of February, it looked as if the Japanese yen was poised to breakout of its recent, slow-grinding recovery. After Friday's close, the yen had been up nearly 3% (year-to-date on a trade-weighted basis), reaching fresh highs since bottoming-out in December. After Monday's reaction in the FX, gold and bond markets, however, the yen's run may have run out of steam.

With political uncertainty seemingly at the forefront of European investors, coupled with a Federal Reserve seemingly reluctant to signal a March rate hike, interest rates around the world have been in a state of disarray as-of-late. The safe-haven bid into bonds has enabled short-term yields across the globe to reach fresh 2017 lows. The German 2-year yield, which had been in free-fall all of last week, reached an all-time low, nearing an unprecedented negative 100 basis points on Friday.

Typically, when yield differentials are moving higher in favor of the US, the greenback tends to appreciate. That has not been the case as the drop in the euro and the pound vs the yen have instead dragged the USD/JPY lower despite favorable yield differentials between the US and Japan.

This has potentially changed after Monday's price action that saw key reversals in the US dollar, gold and most importantly treasury yields. While most have been focused on what the Trump administration will do next, there was a key development on Monday that should be highlighted. This is the fact that the market has finally priced-in more than a 50/50 chance of a March rate rise. This was apparently on the back of hawkish Fed-speak despite tepid economic data earlier in the Monday's North American session.

Consequently, Monday's reaction has potentially marked the exhaustion of several key trends that have provided a recent headwind against the greenback. It now looks as if Friday's price action in treasury yields may have represented a downward exhaustion into key support, highlighting a key base in US 2-year yields at 1.15%. Also, the dollar's latest move could potentially highlight a successful defense of a key Fibonacci retracement (38.2% of Y101/Y118 bounce) near Y112. And lastly, Monday's price movement in gold could be setting up a topping phase near the 200-day moving average.