USD/JPY flirts with monthly high, bulls await a move beyond 115.00 mark

The USD/JPY pair built on its steady intraday ascent and moved back closer to the 115.00 psychological mark heading into the European session.

Following the previous day's subdued/range-bound price moves, the USD/JPY pair attracted fresh buying on Wednesday and was last seen trading just a few pips below the monthly high. The uptick, however, lacked bullish conviction and is more likely to remain capped amid a softer risk tone, which tends to benefit the safe-haven Japanese yen.

Uncertainty over the economic impact of the continuous surge in new COVID-19 cases offset the recent optimism led by reports that the Omicron variant might be less severe than previously feared. This was evident from a generally weaker trading sentiment around the equity markets, which, in turn, could act as a headwind for the USD/JPY pair.

Meanwhile, the flight to safety led to a modest downtick in the US Treasury bond yields and kept the US dollar bulls on the defensive through the early part of the trading on Wednesday. This might further hold back traders from placing aggressive directional bets and keep a lid on any meaningful upside for the USD/JPY pair.

Even from a technical perspective, traders might wait for a sustained strength beyond an ascending channel resistance before positioning for a further appreciating move. The mentioned barrier coincides with the 115.00 mark, which should now act as a key pivotal point and help determine the near-term trajectory for the USD/JPY pair.

Market participants now look forward to the US economic docket, featuring the second-tier releases of the November Goods Trade Balance, Wholesale Inventories and Pending Home Sales data. This, along with the US bond yields, will influence the USD. Apart from this, the broader market risk sentiment might provide some impetus to the USD/JPY pair.

Technical levels to watch