USD/JPY consolidates biggest daily gains in two weeks around 113.50 on steady yields

• USD/JPY seesaws inside 10-pip range after a stellar rally.
• Yields, Wall Street cheered receding fears of Omicron, stimulus hopes amid a lack of Fed rate hike chatters.
• Japan’s PM Kishida’s readiness to recall lockdowns, if needed, joins mixed concerns over virus and pre-Fed mood to test bulls.
• Japan household spending posted a three-month downtrend in October.

USD/JPY struggles between 113.45 and 113.55 following the biggest daily jump since late November. That said, the yen pair seeks fresh catalysts to extend the run-up as Tokyo opens for Tuesday.

In addition to the absence of the market-moving factors, downbeat data from Japan and fresh fears of the South African covid variant, dubbed as Omicron, also weigh on the USD/JPY prices. Above all, steady US Treasury yields and inactive stock futures challenge the risk barometer pair’s latest moves.

Japan’s Overall Household Spending for October dropped for the third consecutive month, per YoY readings of -0.6% versus -1.9% prior. “Policymakers are hoping a rebound in domestic demand will support the economy as manufacturers navigate a global chip shortage and are hit by surging raw material prices,” Reuters said following the data release.

Elsewhere, Japan Prime Minister Fumio Kishida showed readiness to "prepare for the worst" in dealing with the Omicron variant of the coronavirus while still moving swiftly to get the economy back on track, per Kyodo News. It’s worth noting that Tokyo recently marked the third Omicron case while the overall COVID-19 infections eased.

On Monday, fears emanating from the coronavirus strain eased amid an absence of data supporting the previous woes citing heavy death toll and faster spread. Also favoring the risk-on mood were the hopes of finding a cure to Omicron. Additionally, consolidation of Friday’s heavy fall amid an absence of Fedspeak could also be cited as a positive catalyst for USD/JPY.

Looking forward, USD/JPY traders may witness lackluster moves amid a light calendar. Hence, headlines covering the coronavirus and inflation, as well as the performance of the US Treasury yields will be important to watch for fresh impulse.

Technical analysis

Although the previous resistance line from March restricts short-term downside around 112.50, 20-DMA surrounding 114.00 guards short-term upside of the USD/JPY prices.