The USD/JPY pair remained confined in a range through the early European session and was last seen trading just below mid-114.00s, or a near one-month high touched earlier this Friday.
The prevalent risk-on environment – as depicted by an extension of the recent rally in the equity markets – continued undermining the safe-haven Japanese yen. This, in turn, was seen as a key factor that acted as a tailwind for the USD/JPY pair, though subdued US dollar price action kept a lid on any meaningful upside.
The recent optimism was led by reports indicating that the current vaccines may be more effective than first thought in fighting the Omicron variant. Adding to this, studies suggested that the Omicron infections are less likely to lead to hospitalization, which further boosted investors' appetite for perceived riskier assets.
Bullish traders further took cues from the recent leg up in the US Treasury bond yields, bolstered by the Fed's hawkish outlook and strong US inflation data released on Thursday. It is worth recalling that the so-called dot plot indicated that the Fed officials expect to raise the fed funds rate at least three times next year.
The Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge – accelerated to 5.7% YoY in November, marking the largest annual growth since 1982. This lifted expectations for a Fed liftoff in March 2022, which supports prospects for the emergence of some USD dip-buying and further gains for the USD/JPY pair.
Investors, however, seemed reluctant to place aggressive bets amid the year-end thin liquidity conditions and absent relevant market moving economic releases. This, in turn, suggests that the USD/JPY pair is more likely to prolong its range-bound price action and consolidate its recent gains recorded over the past three weeks or so.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2022 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.