Risk-on mood maintains yen above 115

On the final day of 2021, the major currency pairs are in a tight range. USD/JPY is showing little movement as it trades at 115.10 in the European session.

Risk sentiment pushes weighs on yen 

This week has been characterized by two important factors – a dearth of tier-1 economic data and a lack of liquidity. As a result, market movement has been largely driven by sentiment. It seems that investors are in a pretty good mood ahead of the New Year, even with screaming headlines of a massive spike in Covid infection rates. Many countries are reporting that most new cases are of the Omicron variety, as this newest Covid variant is extremely contagious. On Wednesday, the US set a new daily record with a staggering 488 thousand new cases. Still, Wall Street remains in rally mode, unperturbed by the skyrocketing number of Omicron cases. The reason is that until now, Omicron appears to be less severe compared to previous Covid variants. Hospitalisation rates have not surged and most countries are not responding with lockdowns, which has allowed risk sentiment to remain high.

In the current risk-on environment, the safe-haven yen is having a tough time and is poised to post a losing week for the fourth time in a row. USD/JPY is not far below the November high of 115.52. This marked the pair’s highest level since January 2017, and it’s very possible that this line will be broken in January. The yen’s fortunes early in the New Year will also depend on the US/Japan rate differential. If US Treasury yields continue to move higher as was the case this week, then the yen is likely to lose more ground.

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USD/JPY Technical

• USD/JPY continues to put pressure on resistance at 114.83. Above, there is resistance at 115.26
• There is support at 112.90 and 112.47

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