USD/JPY defends 115.00 at monthly top amid sluggish markets

• USD/JPY pauses two-day uptrend after refreshing five-week top.
• Yields remain pressured, stock futures stay indecisive around a record high.
• Market players stay cautiously optimistic amid mixed concerns over Omicron, geopolitics and US stimulus.
• Light calendar, New Year’s Eve to restrict market moves.

USD/JPY bounces off intraday low to 115.05 as bulls take a breather during Friday’s Asian session, after a two-day run-up to refresh the monthly peak.

Holidays in Japan, Australia, Japan and New Zealand could be linked to the yen pair’s latest indecision. However, a lack of major data/events and mixed signals from the risk catalysts are likely to have a major part in the USD/JPY pair’s recently subdued performance.

An imbalance between the steadily rising covid cases and the global policymakers’ cautious optimism concerning the South African covid variant, namely Omicron takes the lead to challenge the traders. Japan reports a two-month high COVID-19 figure around 500 for the second consecutive day whereas Reuters’ tally for the US seven-day average of new coronavirus cases refreshes record top for the second consecutive day with 290,000 cases at the latest. Even so, only Canada’s Quebec has announced a total curfew to reject the year-end celebration while the rest are likely to welcome 2022 with mild activity restrictions.

Other than the virus woes, the geopolitics are also challenging the USD/JPY prices as the absence of breakthrough from recent talks between US Preside Joe Biden and his Russian counterpart Vladimir Putin joins Iran’s space launch and Sino-American tussles.

On a different page, the US policymakers remain hopeful of reaching an agreement over the Build Back Better (BBB) while Japanese diplomats cheer record budget and show readiness to battle the pandemic. It’s worth noting that authorities from Japan have recently suggested further easy money policies while citing the Omicron woes and rejecting inflation fears.

Amid these plays, the Wall Street benchmarks posted mild losses whereas the US 10-year Treasury yields consolidated the heaviest daily jump in three weeks, posted the previous day. That said, the S&P 500 Futures remain lackluster around 4,775 at the latest.

Moving on, a light calendar and sluggish year-end mood may restrict USD/JPY moves.

Read: USD/JPY 2022 Forecast: Japanese stagnation should sound all the alarms for those looking to buy the JPY

Technical analysis

Failures to cross November 25 low near 115.25 joins overbought RSI conditions to hint at a pullback in the USD/JPY prices. In doing so, the sellers need to conquer a two-week-old immediate support line, near 115.00, before targeting the mid-December tops near 114.25.