USD / JPY falls below 113.00 level, near three-week lows

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  • USD / JPY sees new selling on Tuesday and falls to a nearly three-week low.
  • Risk-off sentiment benefits the safe-haven JPY and puts pressure on the pair.
  • Falling US bond yields weighs on the USD and contributes to the current decline in the pair.

The pair USD/JPY has fallen to a nearly three-week low at the start of Tuesday’s European session, with the bears looking for sustained weakness below the 113.00 level. At time of writing, the pair is trading around 112.90-95, close to three-week lows.

The pair struggled to capitalize on its initial positive move and once again encountered new sales near the 114.00 level. Global risk sentiment was hit amid concerns about possible economic consequences from the Spread of a new variant of the vaccine-resistant coronavirus, called Omicron. This was evident by a further decline in equity markets, which boosted demand for the safe-haven Japanese yen and put downward pressure on the USD / JPY pair.

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Already weaker sentiment deteriorated further after Moderna CEO Stéphane Bancel predicted that existing vaccines will be much less effective in dealing with omicron than previous strains of Covid-19. The pair’s bears took further cues from the current sharp drop in US Treasury yields, which weighed heavily on the US dollar. This was seen as another factor that contributed to the fall of the USD / JPY pair to the lowest level since November 10.

In fact, the benchmark 10-year US government bond yield again fell close to the 1.45% level amid declining expectations for an early tightening of monetary policies by the Fed. Despite the negative factors, the USD / JPY has, so far, been showing some resistance below the round level of 113.00 . This warrants some caution for bears before positioning for an extension of last week’s sharp pullback from a nearly five-year high around 115.50.

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Market participants are now waiting for the US economic calendar, where the publication of the Conference Board’s consumer confidence index at the start of the US session stands out. However, the market focus will remain on Fed Chairman Jerome Powell’s testimony before the Senate Banking Committee. This will influence market expectations about the Fed’s next monetary policy move and could generate some significant opportunities around the USD / JPY pair.

USD / JPY technical levels

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