USD/JPY hovers around the 113.00 figure, amid higher US T-bond yields

The USD/JPY slumps for the fifth consecutive day, down 0.10%, trading at 112.84 during the New York session at the time of writing.  Market sentiment is upbeat after a volatile Tuesday’s session, headed for the Omicron COVID-19 variant and Federal Reserve Chief Jerome Powell’s hawkish comments that dented investors mood.

During the overnight session, the USD/JPY peaked around 113.66, 20 pips above the 50-hour simple moving average (SMA) but, in the last couple of hours, as Wall Street opens, the USD/JPY has dropped beneath 113.00, on no apparent news, despite the upward move in the US 10-year Treasury yield, up to four basis points, sitting at 1.48%.
In the meantime, the US Dollar Index, which tracks the greenback’s value against six rivals, is down 0.19%, at 95.81, below the 96.00 figure reclaimed on Tuesday, as market sentiment dampened.

On Tuesday, hawkish commentary of Jerome Powell, which signaled that inflation is no longer “transitory” and favors a faster bond taper, spurred volatility around the markets. Short-term US bond yields heightened as the curve flattened the most since March of the last year. Also, on Wednesday at 1500 GMT, Powell will appear before the House of Representatives, finishing his appearance on the Congress. Any meaningful words that he says would be intensely scrutinized by investors.

According to ADP Research Institute, before Wall Street opened, the US ADP Employment Change for November showed that private payrolls rose by 534K, more than the 525K foreseen by analysts.  According to Nela Richardson, ADP’s chief economist, “the labor market recovery continued to power through its challenges last month.” Further, she added that “service providers, which are more vulnerable to the pandemic, have dominated job gains this year. It’s too early to tell if the omicron variant could potentially slow the jobs recovery in coming months.”

That said, USD/JPY traders’ focus turns to Fed’s Chief Jerome Powell’s appearance on the Congress, and Friday’s Nonfarm Payrolls report.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart depicts that the pair has a near-term downward bias, though on Tuesday, despite breaking the 50-day moving average (DMA) to the downside, it bounced off the November 9 low at 112.72 reclaimed the 113.00 figure. Additionally, on November 10, a 130 pip upward move, which formed a large bullish engulfing candle pattern, boosts confidence for USD bulls and reinforces that 112.72 would be problematic support to overcome for USD bears.

Further, the 100 and the 200-DMA’s with an upslope, residing below the spot price, support the upward bias, which coupled with current fundamentals of the USD/JPY with the Fed looking for a faster taper would cap any downward moves.

However, in the outcome of moving lower, the first support would be the November 9 low at 1112.72. Breach of the latter would expose the September 30 low high at 112.07 previous resistance-turned-support, followed by the 100-DMA at 111.56.

On the flip side, the 50-DMA at 113.30 would be the first resistance. A break of the former would expose the November 10 high at 114.00, followed by the October 20 cycle high at 114.70.