USD/JPY hovers around mid-113.00s as yields pause three-day fall

• USD/JPY struggles for a clear direction amid a quiet session, refreshes intraday top.
• Bond coupons seesaw around weekly low, S&P 500 Futures print mild gains.
• BOJ offers to acquire two trillion yen of bonds via repo.
• Omicron fears worsen, US stimulus hopes renew but nothing more important than Fed.

USD/JPY pokes intraday high close to 113.60 as Tokyo opens for Tuesday, after rising the most in a week the previous day. Even so, the yen pair prints 0.02% daily gains by the press time.

The risk barometer pair portrays the market’s sour sentiment amid fears of the South African covid variant, dubbed as Omicron, as well as anxiety ahead of the key central bank meetings. However, the US dollar bulls refrain from stepping back, also ignoring the weaker Treasury yields, as traders have high hopes from the US Federal Reserve (Fed).

The UK’s first Omicron-linked death and return of the mask mandate in California are some of the latest updates concerning the virus strain. The same push the finance ministers and central bank governors of the Group of Seven (G7) nations to pledge more efforts to combat the COVID-19 variant and supply chain issues. Also portraying the Omicron effect is the update from the Asian Development Bank (ADB). “The ADB on Tuesday trimmed its growth forecasts for developing Asia for this year and next to reflect risks and uncertainty brought on by the new Omicron coronavirus variant,” per Reuters.

On a different page, the Bank of Japan (BOJ) offered to purchase 700 billion yen in Japanese Government Bond (JGB) repurchase future while also proposing the acquisition of two trillion yen in bonds via repo. The BOJ actions could well be linked as a preparation for the Omicron crisis.

It’s worth observing that indecision ahead of critical central bank meetings provided a dull start to the week with the US Treasury yields declining the most in seven days while the Wall Street benchmarks also posted losses. By the press time, the US 10-year Treasury yields seesaw around 1.42% whereas the S&P 500 Futures print mild gains. The reasons could be linked to the stimulus hopes from the US amid the Democratic push to have a $1.75 trillion worth of aid package by the end of 2021.

Moving on, US Producer Price Index (PPI) for November, expected 9.2% YoY versus 8.6% prior, may offer intermediate direction to the USD/JPY traders. However, major attention will be given to the risk catalysts and central bank updates, not to forget virus news, for a clearer view.

Technical analysis

While 50-DMA guards immediate upside around 113.70, double tops marked around 113.95 becomes the key hurdle to cross for the USD/JPY bulls before retaking the controls. On the contrary, 113.20 will precede the 113.00 threshold and the monthly bottom near 112.50 to entertain the sellers.