USD/JPY prints five-day downtrend above 114.00 on sour sentiment, yields, inflation eyed

• USD/JPY stays pressured during five-day downtrend to weekly low.
• Fed Nominees highlight inflation as major challenge, BOE, ECB could lay out plans or act forthwith to tame price pressures.
• US employment numbers surprised to the negative but yields couldn’t recover.
• Japan prints record daily covid infections, US ISM Services PMI important too.

USD/JPY takes offers to refresh intraday low around 114.35 during the consecutive fifth day of downside as markets in Tokyo open for Thursday’s trading.

The risk barometer pair not only cheers the broad US dollar weakness but also portrays the sour sentiment in the market ahead of the key central bank meetings by the press time. Also exerting downside pressure on the USD/JPY could be the coronavirus risks in Japan as well as inflation fears highlighted by all three Fed Nominees from US President Joe Biden.

That said, Japan, unfortunately, refreshed record top daily covid infections on Wednesday. As a result, Kyodo News mentions, “Japan confirmed a record 94,908 coronavirus cases Wednesday, eclipsing the previous record logged late last week by nearly 10,000 and exceeding the 90,000 mark for the first time, as the highly transmissible Omicron variant continues to wreak havoc across the country.”

On the other hand, US President Biden’s all three Nominees for the Fed Board highlights inflation as a major challenge and showed readiness to act.

It’s worth noting that a negative surprise by the US ADP Employment Change for January, -301K versus +207K expected, weighed on the US Dollar Index (DXY), as well as the US 10-year Treasury yields. However, Wall Street managed to close with mild gains but not the S&P 500 Futures that is down 1.0% by the press time.

Furthermore, cautious sentiment ahead of the key monetary policy meetings by the European Central Bank (ECB) and the Bank of England (BOE) also challenges the market sentiment amid recently high inflation pushing policymakers towards taming the easy money.

Given the risk-off mood, the market’s rush towards the traditional safe-havens like the Japanese yen and gold escalates, which in turn drags the USD/JPY prices.

Moving on, markets are likely to remain sidelined, mostly risk-off, ahead of the aforementioned monetary policy decisions. Following that, US ISM Services PMI for January, expected 59.5 versus 62.0 prior, will also be important to watch further direction.

Technical analysis

50-DMA level of 114.30 challenges USD/JPY bears from targeting the 100-DMA support near 113.65. Alternatively, bulls remain hopeful until the quote stays below the November 2021 peak of 115.52.