USD/JPY remains under pressure below 114.00 as tensions arise in Eastern Europe and risk-off sentiment
- A downbeat market sentiment favors the safe-haven status of the Japanese yen vs. the greenback, US T-bond yields fall.
- JP Morgan closes its long positions in the Russian rouble as tensions in Eastern Europe arise.
- USD/JPY Technical Outlook: Points upward, but a break under 113.50 could send the pair tumbling to 112.53.
After testing the YTD lows reached on January 14 around 113.48, the USD/JPY edges up, some 0.09%. At the time of writing, the USD/JPY is trading at 113.75 during the New York session.
Market sentiment downbeat amid increasing tensions in Eastern Europe and the Fed monetary policy meeting
The risk-off market mood spurred by increasing tensions in Eastern Europe and the two-day Federal Reserve monetary policy meeting keeps investors unease on mounting expectations that the US central bank would be aggressive tightening its policy conditions amid rising inflation, which reached 7% on December’s report.
According to Reuters, JP Morgan closed all its remaining long positions in the Russian rouble on Monday, “warning the military build-up near Ukraine meant geopolitical uncertainty was now prohibitively high.” That alongside the US 10-year Treasury yield moving lower, from around 1.80% in the last week, at press time plunges almost six basis points, from 1.772% to 1.719%, weighs on the USD/JPY, which has a positive correlation with US T-bond yields.
In the meantime, the US Dollar Index, a gauge of the greenback against six peers, is at 96.00, reached at 14:22 GMT.
The economic docket witnessed a release of Markit PMI’s across the globe. In Japan, the Manufacturing PMI rose to 54.6, but the Services component plummeted to 46.6 from 52.1 in December. As a result, the composite PMI is down to 48.8, the first time below 50 since the September reading. Meanwhile, the Markit PMI for the US will be unveiled at 14:45 GMT in the US. December’s reading portrayed the Manufacturing PMI at 57.7, the Services PMI at 57.6, and the Composite stayed at 57.0.
USD/JPY Price Forecast: Technical outlook
The USD/JPY daily chart witnessed a second touch at the YTD lows around 113.48, near the 78.6% Fibonacci retracement, drawn from November 2021 cycle lows at 112.53 up to January 4 pivot high at 116.34. That alongside the 100-day moving average (DMA) around 113.28 should cape any downward moves in the pair, which in the case of being broken, would expose November 30, 2021, daily low at 112.53.
The USD/JPY first resistance level would be 114.00. A breach of the latter would expose the 50-DMA at 114.32, followed by the January 18 daily high at 115.08.