USD/JPY holds higher on risk bounce but buyers have work to do

USD/JPY up close over 40 pips on the day to 113.55 currently

The rebound today comes after buyers staved off a daily close below the 9 November low @ 112.73 as the greenback recovered some poise late on yesterday amid Fed chair Powell’s hawkish surprise.

We are seeing buyers build on that in a push to 113.50 levels coming off the back of a more positive risk mood in the market, with omicron fears being cast aside for now.

The bond market is also responding more favourably, with 10-year Treasury yields up 6 bps to 1.50% on the day. Of note, yields bounced off a key technical region overnight – surviving a test of support at 1.415% and the 100-day moving average (purple line):

While things are looking more upbeat for USD/JPY, buyers still have more work to do in order to validate any material push above 114.00. A look at the near-term chart:

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Price action is still sitting below both key hourly moving averages and that keeps sellers in near-term control. The first key point of contention is the 100-hour moving average (red line) @ 113.88 and buyers will have to breach that and preferably the 114.00 level to really get a sense that the momentum is shifting back in their favour.

Otherwise, the latest bounce here is still looking rather tentative and the ebb and flow involving omicron fears/headlines will continue to dictate things for the most part.

But at least dollar bulls can take some comfort from Powell’s remarks yesterday, though the follow through will depend on COVID-19 developments surely.