USD/JPY Is Trading Near The Monthly High Achieved On Wednesday

The USD/JPY recovered some of its lost ground on Thursday as fears over Omicron eased. However, Dollar demand was subdued, and US Treasury rates were lower, preventing significant increases.

Investors are looking forward to the release of macroeconomic data from the United States to gain some short-term trading momentum.

Technical Analysis


The USD/JPY pair continued to trade with a bullish bias during the early European session and was last seen lingering near the day’s high, in the vicinity of 114.20.

On Thursday, the USD/JPY pair recovered traction upward after the previous day’s drop from the monthly peak. The overall optimistic tone aided this in the trades.

Review Of The Fundamentals

Increasing concerns that the novel fast-spreading COVID-19 strain might derail economic growth have undercut the relatively secure Japanese Yen, acting as a tailwind for the mains.

Investors were more upbeat about the future after indications emerged that the current vaccinations might be more successful than previously anticipated in combating the Omicron fore.

Furthermore, data from South African research revealed that people infected with Omicron had lower rates of hospitalization and severe sickness when compared to those infected with the Delta strain, which further elevated the risk attitude in the community.

Meanwhile, the rise lacked positive confidence due to weakening demand for the US Dollar and a dovish tone surrounding US Treasury bond rates.

As a result, bullish traders should exercise care as the year comes close and liquidity conditions are very low heading into the Christmas season.

Therefore, it would be advisable to hold off on any further gains unless there is a significant amount of follow-through purchasing activity.

Market players are now looking forward to the publication of the US economic docket, which will include the release of the Core PCE Price Index and Durable Goods Orders data, among other things.

This, in conjunction with the rates on US Treasury bonds, will impact the price dynamics of the USD and offer some momentum to the USD/JPY pair. 

In addition, traders will look to the broader market risk mood for clues on where they should look for chances in the short term.

Extending Rally

The USD/JPY appears to be consolidating above the resistance level of 113.96. Because a significant foundation has been established, analysts at Credit Suisse retain their favorable core to return to 115.52/62.

According to the experts, the market is looking for a sustained stay above opposition at 113.96 to indicate that the current consolidation has ended and the core uptrend has restarted.

If this is verified, they will look for strength to return to 115.52/62 initially before attempting to break out of the long-term decline that began in April 1990 and is currently visible at 116.85.

In the short term, they anticipate a new phase of stability to develop near 116.85, but they are looking for a break higher after this to target the 118.61/66 highs of late 2016 and early 2017.

Near-term support is at 113.95, followed by 113.55, with a break below 113.15 required to re-establish a negative tendency in preparation for a retest of the late November low of 112.53/45 and a 38.2% retracement of the advance from April highs.

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