USD/JPY struggles below 115.00 amid lackluster yields, US ADP Employment data eyed

• USD/JPY holds lower grounds near weekly low after three-day downtrend.
• US Treasury yields struggle to extend month-start rebound, stock futures track Wall Street gains.
• Japan Monetary Base data came in strong for January, Omicron woes trouble Tokyo.
• US ADP Employment Change for January will be eyed for NFP, risk catalysts are important too.

USD/JPY picks up bids to refresh intraday high around 114.80 as the market’s in Tokyo open for Wednesday. Even so, the risk barometer pair remains depressed around a one-week low after the three-day downtrend.

USD/JPY tracks gold price moves as bears struggle ahead of the key weekly events. In doing so, the quote fails to justify the previous day’s rebound of the US 10-year Treasury yields, recently sluggish around 1.80%.

Read: Gold Price Forecast: Bears wait in the flanks below counter-trendline daily resistance

Behind the moves could be a blend of mixed comments from the US Federal Reserve (Fed) officials and the recently firmer US data, not to forget indecision over the Russia-Ukraine issues.

The US ISM Services PMI for January rose to 57.6 versus 57.5 expected, marking the 20^th straight expansion of the manufacturing activity, which in turn allowed the Fed to keep its hawkish bias. However, recent Fedspeak has been confusing and tests the US dollar bulls ahead of the key US jobs report for January, up for publishing on Friday.

Atlanta Fed President Raphael Bostic said on Tuesday that there is a "real danger" of inflation expectations drifting from the Fed's 2.0% target to 4% or higher. On the other hand, St Louis Fed President James Bullard said that he thinks it is an open question whether the Fed will have to become more restrictive (i.e. raise rates above the "neutral" 2.0%-2.5% zone). 

Elsewhere, global diplomats escalate pressure on Russia to step back from a war with Ukraine amid increasing military presence at the border. However, the latest updates have been positive.

At home, policymakers worry about the negative impact of the South African covid variant after witnessing Tokyo’s first contraction in the population growth in 26 years. Omicron isn’t the only challenge for Japanese diplomats as the country’s Vice Finance Minister Kanda highlighted the mixed impact of weaker yen on economics. That said, Japan’s Monetary Base for January rose past 8.3% prior and 7.8% forecast to 8.4% YoY.

Looking forward, USD/JPY traders may pay attention to the risk catalysts amid a light calendar heading into the US ADP Employment Change for January, expected 207K versus 807K prior. The reading is well-known as a precursor to Friday’s US Nonfarm Payrolls (NFP) and hence could recall the pair buyers on positive surprise.

Technical analysis

USD/JPY bounced off 21-day EMA, around 114.65 at the latest, to again for crossing the November 2021 peak of 115.52.