• USD/JPY regained positive traction on Monday and was supported by a combination of factors.
  • Easing fears about Omicron boosted the risk sentiment and undermined the safe-haven JPY.
  • Rising Fed rate hike bets, rebounding US bond yields boosted the USD and remained supportive.

The USD/JPY pair maintained its bid tone heading into the European session and was last seen hovering near the top end of its daily trading range, around the 113.00 mark.

A combination of factors assisted the USD/JPY pair to regain positive traction on the first day of a new week and reverse Friday's modest losses. The global risk sentiment stabilized a bit in reaction to reports from South Africa, suggesting that Omicron patients only had relatively mild symptoms. This was evident from a generally positive tone around the equity markets, which undermined the safe-haven Japanese yen and acted as a tailwind for the USD/JPY pair.

Bullish traders further took cues from a goodish rebound in the US Treasury bond yields from the lowest level since September. This, along with the prospects for a faster policy tightening by the Fed, helped revive the US dollar demand and provided an additional boost to the USD/JPY pair. In fact, the money markets indicate a high probability that the Fed would hike interest rates by May 2022 to contain stubbornly high inflationary pressures.

The market expectations were unaffected by Friday's mixed US payrolls report, showing that the economy added 210K jobs in November as against 550K anticipated. This, however, was offset by a sharp fall in the unemployment rate to 4.2% from 4.6% in October. Moreover, the Fed has acknowledged a sufficient labor market recovery to permit higher interest rates, which, in turn, favours the USD bulls and supports prospects for additional gains for the USD/JPY pair.

Even from a technical perspective, bulls, so far, have been showing some resilience ahead of mid-112.00s, which should now act as a strong base for the USD/JPY pair. That said, it will still be prudent to wait for a strong follow-through buying before positioning for any further appreciating move. There isn't any major market-moving economic data due for release from the US on Monday, further warranting some caution for aggressive bullish traders.

Technical levels to watch


Today last price 113.05
Today Daily Change 0.28
Today Daily Change % 0.25
Today daily open 112.77
Daily SMA20 113.93
Daily SMA50 113.4
Daily SMA100 111.64
Daily SMA200 110.52
Previous Daily High 113.61
Previous Daily Low 112.56
Previous Weekly High 113.96
Previous Weekly Low 112.53
Previous Monthly High 115.52
Previous Monthly Low 112.53
Daily Fibonacci 38.2% 112.96
Daily Fibonacci 61.8% 113.21
Daily Pivot Point S1 112.35
Daily Pivot Point S2 111.93
Daily Pivot Point S3 111.3
Daily Pivot Point R1 113.4
Daily Pivot Point R2 114.03
Daily Pivot Point R3 114.45



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