• USD/JPY continued losing ground for the third straight day and dropped to a fresh weekly low.
  • The risk-off mood benefitted the safe-haven JPY and exerted pressure amid sliding bond yields.
  • Hawkish Fed expectations acted as a tailwind for the USD and helped limit any further losses.

The USD/JPY pair maintained its offered tone through the early European session, albeit has managed to recover a few pips from the weekly low. The pair was last seen trading just below the 114.00 mark, still down around 0.20% for the day.

The pair extended this week's rejection slide from the key 115.00 psychological mark and witnessed some follow-through selling for the third successive day on Friday. The downward trajectory dragged the USD/JPY pair back closer to the monthly swing low and was sponsored by a combination of factors.

Concerns that rising borrowing costs could dent the earnings outlook for companies tempered investors' appetite for perceived riskier assets. This was evident from a weaker tone around the equity markets, which forced investors to take refuge in safe-haven currencies, including the Japanese yen.

Bearish traders further took cues from the ongoing retracement slide in the US Treasury bond yields from multi-year highs, which undermined the US dollar. That said, the prospects for a faster policy tightening by the Fed acted as a tailwind for the buck and helped limit losses for the USD/JPY pair.

Investors seem convinced that the Fed would begin raising interest rates in March to combat stubbornly high inflation and have been pricing in the possibility for a total of four hikes in 2022. Hence, the market focus will remain glued to the upcoming FOMC monetary policy meeting on January 25-26.

The outcome will be looked upon for fresh clues and clearer signals about the likely timing when the Fed will commence its rate hike cycle. This, in turn, will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair.

In the meantime, the US bond yields will drive the USD demand. Apart from this, traders will take cues from the broader market risk sentiment for some short-term opportunities around the USD/JPY pair amid absent relevant market moving economic releases from the US.

Technical levels to watch

USD/JPY

Overview
Today last price 113.9
Today Daily Change -0.30
Today Daily Change % -0.26
Today daily open 114.2
 
Trends
Daily SMA20 114.97
Daily SMA50 114.33
Daily SMA100 113.2
Daily SMA200 111.45
 
Levels
Previous Daily High 114.55
Previous Daily Low 113.96
Previous Weekly High 115.85
Previous Weekly Low 113.48
Previous Monthly High 115.21
Previous Monthly Low 112.56
Daily Fibonacci 38.2% 114.19
Daily Fibonacci 61.8% 114.32
Daily Pivot Point S1 113.93
Daily Pivot Point S2 113.65
Daily Pivot Point S3 113.34
Daily Pivot Point R1 114.51
Daily Pivot Point R2 114.82
Daily Pivot Point R3 115.1

 

 

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