USD/JPY tracks downbeat US Treasury yields around 113.50

• USD/JPY fails to extend Friday’s corrective pullback, refreshes intraday low.
• Coronavirus woes join Fed rate-hike chatters, disappointment over US stimulus to weigh on risk appetite.
• US Treasury yields drop for third consecutive day, stock futures are down too.
• Risk catalysts are in the driver’s seat amid light calendar.

USD/JPY refreshes intraday low to 113.50, down 0.20% on a day on Monday’s Tokyo open.

The yen pair portrays the risk-off mood in the market, following the US Treasury yields and equity futures, amid fears emanating from the South African covid variant, dubbed as Omicron, as well as concerning US stimulus and Fed-rate-hike calls.

Omicron cases are on a spike in the West, especially in Europe and the UK, which in turn challenges the holiday spirit and calls for further activity restrictions. The UK reported a 52% jump in the covid cases while Senior US Medical Expert Anthony Fauci fears more measures to curb the COVID-19 cases. “Dr. Anthony S. Fauci, the nation’s top infectious disease expert, warned on Sunday that the extraordinarily contagious Omicron variant of the coronavirus was raging worldwide and that it was likely to cause another major surge in the United States, especially among the unvaccinated,” per the New York Times.

On a different page, US Democrats seem on the brink of failure to push for voting on the Build Back Better (BBB) plan after the key Senator refused to back the stimulus. “West Virginia's Joe Manchin appeared to deal a fatal blow to President Joe Biden's signature domestic policy bill, known as Build Back Better, which also aims to expand the social safety net and tackle climate change,” said Reuters.

It’s worth noting that Friday’s comments from Fed Board of Governors member Christopher Waller renewed the call for the Fed-rate-hike and propelled the US dollar. “The ‘whole point’ of the Fed's decision to accelerate the pace of its QE taper was to make the March Fed meeting "live" for a first rate hike,” the policymaker said per Reuters.

That said, the US 10-year Treasury yields dropped 2.4 basis points (bps) to 1.378% while the S&P 500 Futures declined 0.70% intraday by the press time. Also portraying the risk-off mood is a 1.0% fall in Japan’s Nikkei 225.

Moving on, a light calendar and year-end holiday mood may restrict USD/JPY moves. However, risk catalysts may offer intermediate directions to the pair traders.

Technical analysis

Repeated failures to cross the 50-DMA, around 113.85 by the press time, direct USD/JPY prices towards the monthly low surrounding 112.55.