USD/JPY retreats from daily highs but clings to the 115.00 region

The USD/JPY reversed the curse as the weekend approached amid a mixed market sentiment, driven by Russia/Ukraine headlines crossing the wires, down 0.23% in the week. At the time of writing, the USD/JPY is trading at 115.00.

The market sentiment is downbeat. Europan indices record losses, while the US equity futures point that Wall Street would open negatively. Meanwhile, the US Dollar Index, a gauge of the greenback’s value against a basket of its rivals, grinds up 0.13%, sits as 95.920. Contrarily, the US 10-year T-note yield drops three basis points, eyeing to close the week under the 2% threshold, at 1.939%, putting a lid on the USD/JPY.

Russia/Ukraine update

Developments in the Russia/Ukraine conflict fluctuate between de-escalation/escalation mode in the last couple of hours. First, US Secretary Blinken proposed a meeting with Russian Foreign Minister Lavrov late in the week. However, it is conditioned to Russia not invading Ukraine, as reported by the US State Department. Meanwhile, clashes in East Ukraine continued on Friday, as the OSCE has recorded 80 ceasefire violations, while Russian President Putin will oversee strategic drills on Saturday.

Fed speaking, Bullard and Mester crossed the wires

On Thursday, St . Louis Fed President James Bullard reiterated its intentions to “convince” the board that 100 bps are needed by July 1, while noting that it could be necessary that the US central bank has to go beyond neutral rates. Later on the day, Cleveland’s Fed Loretta Mester said that she favors a March hike and would be “appropriate” to hike the Federal Funds Rate (FFR) faster than in the 2008 financial crisis.

A light US economic docket will feature Existing Home Sales, Consumer Board Leading Index, and Fed speaking as Evans, Williams, and Brainard will cross the wires.

USD/JPY Price Forecast: Technical outlook

The USD/JPY is retreating from daily highs, but the 50-day moving average (DMA) at 114.77 stopped the fall. Nevertheless, the pair is upward biased, but downside risks remain. The outcome of a daily close under the 50-DMA could send the USD/JPY tumbling towards February 2 low at 114.14.

Otherwise, the path of least resistance is upwards. The USD/JPY first resistance would be February 16 daily low at 115.35, previous support-turned-resistance. Breach of the latter would expose February 15 daily high at 115.86, followed by a challenge of the YTD high at 116.35.