USD/JPY stays sluggish above 114.00, ignores Japan Retail Sales, BOJ Summary of Opinions

• USD/JPY takes rounds to monthly high, bounces off intraday low.
• Japan Retail Trade rose 1.9% in October, versus 1.7% consensus.
• BOJ Summary of Opinions showed policymakers discussed inflationary pressure.
• Holiday season, mixed clues over Omicron and light calendar to limit market moves.

USD/JPY struggles for a clear direction during the initial Tokyo trading on Monday. In doing so, the yen pair portray the holiday mood at the desks while also paying a little attention to the domestic catalysts.

Japan’s Retail Trade for October grew past 1.7% market forecasts and 0.9% YoY prior to 1.9% while the seasonally adjusted figures grew to 1.2% versus 0.5% expected and downwardly revised 1.0% prior. It’s worth noting that Large Retailer Sales rose 1.4% against 0.0% consensus and 0.9% previous readouts during the stated month.

In addition to the Japanese data, the Bank of Japan’s (BOJ) latest Summary of Opinions was also released and was ignored by the USD/JPY traders. “Bank of Japan policymakers discussed recent rising inflationary pressures that could force them to alter their view the country remained vulnerable to the risk of deflation,” per the latest report shared via Reuters.

“In the next quarterly report due in January, it's necessary to examine whether the current assessment - that risks to prices are skewed to the downside - remains appropriate,” adds BOJ Summary of Opinions.

Elsewhere, Japan government shares upbeat employment reports concerning college graduates. “A total of 74.2 percent of those who graduated from college in Japan this March found jobs, down 3.5 percentage points from the previous year for the second straight yearly fall amid the coronavirus pandemic, according to government data,” said Kyodo News.

A mixed play of the risk catalysts and an absence of major traders due to the year-end holidays seem to have restricted the immediate USD/JPY moves. That said, the Omicron-linked fears battle optimism about overcoming the pandemic and recently firmer US data to challenge the USD/JPY traders.

That said, the average number of new US coronavirus cases has risen 45% to 179,000 per day over the past week, per Reuters tally whereas the UK and France reported a fresh high of Covid-19 daily infections, respectively crossing 122,000 and 94,000 daily cases at the latest.

On the positive side, a report from Mastercard, shared by Reuters, shows that the US retail sales rose 8.5% during this year's holiday shopping season from Nov. 1 to Dec. 24. Furthermore, US VP Harris sounds optimistic about getting President Joe Biden’s Build Back Better (BBB) plan despite the latest challenges raised by Senator Joe Manchin. Goldman Sachs raised doubt on the issue while saying, “While Congress is likely to approve some new spending on manufacturing and supply chain-related incentives, we no longer expect the Senate to pass the Build Back Better bill and the near-term spending it includes on the extension of the expanded child tax credit." Additionally, receding fears of Omicron, mainly due to positive developments concerning the virus cure and studies showing less hospitalization due to the South African COVID-19 variant, also keep the USD/JPY buyers hopeful.

Amid these plays, the US 10-year Treasury yields remain pressured around 1.48% whereas the S&P 500 Futures print mild gains by the press time.

Looking forward, US Dallas Fed Manufacturing Index for December, expected 13.2 versus 11.8 prior, may offer intermediate moves to the USD/JPY prices, in addition to the risk catalysts, during a likely sluggish session.

Technical analysis

Although a monthly resistance line guards short-term USD/JPY advances around 114.50, buyers remain hopeful until the quote stays beyond the 50-DMA level of 113.88.