Farther From Two-Month Lows, USD/JPY Rises Over Mid-112.00s

ByBarbara Byrne

Dec 1, 2021

The USD/JPY was able to rebound even further from the two-month low thanks to several supportive factors combined. A minor improvement in risk sentiment damaged the safe-haven JPY, which remained supported despite the decline in risk sentiment.

Bulls drew fresh clues from an increase in the rates on US government bonds, nevertheless, a weaker Dollar may limit their gains.

Global risk sentiment began to normalize in response to investors’ preference to wait and see if the new Omicron coronavirus strain would finally disrupt the economic recovery.

This was demonstrated by a modest recovery in the equity markets, which weakened the relatively secure Japanese Yen and functioned as a tailwind for the main currency in the process.

USD/JPY Technical Evaluation

USD/JPY CHART Source: Tradingview.com

After maintaining its bullish tone going into the European session, the US Dollar/Japanese Yen was last seen moving around day highs, in the vicinity of 113.60.

A confluence of variables helped to promote a strengthening of the US Dollar against the Japanese Yen Wednesday following the overnight volatility in the pair’s pricing.

Review Of The Fundamentals

Bulls also took cues from a rebound in US Treasury bond rates that were encouraged by comments from Federal Reserve Chair Jerome Powell, who was hawkish in his remarks.

Powell stated during his testimony before the Senate Banking Committee that it is past time to discard the term “transient” and that it is reasonable to contemplate winding up the cut of the bond-buying sooner rather than later, possibly a few months earlier.

He went on to say that the likelihood of continuously higher inflation has grown and that he expects high inflation to continue into next year.

Currency markets began pricing in the prospect of at least a 50-basis point rate rise by the end of 2022 in response to Powell’s statements.

Consequently, it was considered a significant factor in the persistence of low-interest rates in the United States of America. 

Despite mounting expectations for the Federal Reserve to tighten monetary policy more aggressively, the US Dollar has so far failed to attract any significant purchases. 

This might prevent traders from placing strong bullish wagers and limit the USD/JPY pair’s continued rebound from a near two-month low, which would be detrimental to the overall economy.

Market players looked forward to the publication of the ADP employment data and the ISM Manufacturing PMI, which were both released on Tuesday.

As a separate event, the joint testimony of Federal Reserve Chair Jerome Powell and US Treasury Secretary Janet Yellen before the House Financial Services Panel will have an impact on the USD’s market volatility.

To take advantage of potential changes in the USD/JPY pair, traders will continue to monitor updates in the coronavirus story as well as the wider market risk sentiment for more guidance.

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