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USD / JPY hits one-week high but bullish momentum remains limited


The rise comes against a backdrop of more positive risk, with omicron’s fears being temporarily ruled out. This also allows for higher Treasury yields, further supporting the yen pairs in general.

Scant data continues to show that omicron may be more transmissible than delta but may be less severe. However, the risk still lies with those who are not vaccinated, so this is a place to watch out for. Added to this are the lockdown risks posed by countries like China, which are taking a zero COVID policy approach.

While markets may be bullish now, I’m concerned that less than ideal news on vaccine effectiveness next week may still hurt sentiment. Having said that, expect vaccine makers to reassure that they can find a solution in a matter of “months.” This can present a case for the downside buying if and when the headline barrage appears.

Getting back to the USD / JPY, the price development so far this week has been encouraging for buyers. Short term bias is now on their side, but I still see a capped bullish momentum closer to 114.00. Meanwhile, downward pressure is also limited closer to support @ 112.60-72.

This highlights a rather well-defined range that the pair can play with at the moment.

A rise above 114.00 paves the way for buyers to try to erase the November 26 decline. However, as mentioned above, its durability will depend on the evolution of the virus.

For now, the market operates with the idea that No news, good news. But we’ll see how things go in the days / weeks to come.

On top of that, keep a watchful eye on the bond market as the 10-year Treasury yield chart gets interesting:

USD / JPY hits one-week high but bullish momentum remains limited


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