USD/JPY remains sluggish around 115.50 amid Japan’s off

• USD/JPY pauses two-day downtrend, bounces off intraday low during a sluggish session.
• US jobs report drowned DXY with mixed signals on Friday but covid woes put a floor to the greenback’s weakness.
• Three prefectures in Japan entered a quasi-state of emergency on Sunday due to covid.
• Japanese markets are off due to the Coming-of-Age Day, the light calendar adds to the trading inaction.

USD/JPY treads water around 115.60 as the holiday in Japan and an absence of major data/events restricts the pair’s moves during Monday’s Asian session.

In addition to the absence of domestic players, who are the key for global bond markets, mixed concerns over the Fed’s next move and the coronavirus also limit the risk barometer pair’s latest moves.

The US Dollar Index (DXY) portrayed the biggest daily loss in six weeks after the December month jobs report failed to impress Fed hawks.

That said, the headline US Nonfarm Payrolls (NFP) disappointed markets with 199K figures for December versus 400K forecasts and 249K prior (upwardly revised from 210K). However, the Unemployment Rate dropped to 3.9% compared to 4.1% market consensus and 4.2% in November while the U6 Underemployment Rate that fell to 7.3% against November's downwardly revised 7.7%, both closing in the pre-pandemic levels.

It should be noted, however, that an NFP-led disappointment was largely overruled by the Unemployment Rate and U6 Underemployment Rate, which in turn seems to challenge the market sentiment of late. As a result market bets for the Fed rate hike in March 2022 remains around 80%, following Friday’s uptick to 90% ahead of the data.

Read: US Payrolls Disappoint for the Second Month: Economy seems strong despite Omicron

At home, Okinawa, Hiroshima and Yamaguchi prefectures witness fresh virus-led activity restrictions starting from Sunday that will last till January 31. “Three Japanese prefectures hosting or neighboring U.S. military bases continued to see high coronavirus cases Sunday as COVID-19 quasi-emergency measures took effect in response to surging infections that their governors say stem from the spread of the Omicron variant at the U.S. facilities,” said Kyodo News.

Elsewhere, the US-China tussles continue, recently over trade and the human rights issues, while Russia-Ukraine matter gains major attention ahead of this week’s Washington-Moscow meeting.

Amid these plays, S&P 500 Futures drop 0.20% while the Asia-Pacific shares ex-Japan traded mixed by the press time.

Moving on, a light calendar may restrict market moves on top of Japan’s holidays. However, cautious sentiment ahead of this week’s US inflation numbers and Retail Sales for December may keep the US Treasury yields on the front foot, which in turn can keep the USD/JPY buyers hopeful.

Technical analysis

A clear downside break of the three-week-old ascending trend line, near 115.80 by the press time, keeps USD/JPY sellers hopeful around November’s peak of 115.52.