- A combination of factors pushed USD / JPY to more than a month high on Monday.
- Risk appetite weighs on the safe-haven JPY and supports the pair’s upward move.
- Resurgent USD demand further contributes to the current positive momentum in the pair.
The pair USD/JPY moves higher during the European session on Monday and has soared to the highest level since November 29, around the 115.35 region in the last hour.
A combination of factors helped the USD / JPY pair gain some continuation traction on the first trading day of the new year and prolong a month-old upward movement. The latest optimism about the signs that the variant Ómicron could be less severe than feared and that the economic recovery is unlikely to derail continued to support underlying bullish sentiment in stock markets. This, in turn, weighed on the safe-haven Japanese yen and pushed the pair to move higher amid resurgent demand around the US dollar.
The dollar made a solid comeback after quiet Christmas trading on Monday, reversing a significant part of last week’s slide to a one-month low. The Fed’s optimistic outlook, which indicated at least three rate hikes in 2022along with high yields on US Treasuries turned out to be a key factor that acted as a tailwind for the dollar. It is worth remembering that the benchmark 10-year US government bond yield posted the largest annual increase since 2013 and ended 2021 above the 1.50% level.
Now it will be interesting to see if the pair’s bulls are able to capitalize on the move or choose to lighten their positions ahead of major US macro releases scheduled for early in a new month. This week’s US economic calendar highlights the release of the ISM PMIs and the ADP report on private sector employment. The focus, however, will remain on Friday’s monthly US NFP employment report.
Meanwhile, events surrounding the coronavirus saga will play a key role in influencing broader market risk sentiment and driving demand for the safe-haven JPY. Aside from this, investors will take more indications of US bond yields and price dynamics around the dollar to seize some short-term opportunities. That said, investors might refrain from opening aggressive directional positions and might prefer to wait on the sidelines due to a prolonged weekend in Europe and the US.
USD / JPY technical levels