- The Omicron panic set this week in motion on Friday, November 26.
- The currency and Treasury markets are awaiting confirmation that the variant is dangerous.
- As payrolls miss forecasts, the US NFP weakens Treasury yields and the dollar.
The USD/JPY weekly forecast remains bearish as the Omicron variant spreads and creates a risk-off sentiment in the market. Hence, JPY firms up. A panic reaction to the appearance of Omicron last week rocked the USD/JPY pair and markets in general. In terms of health risks and the distribution of the burden and how governments will react, objective reflections are doubtful.
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The government can impose restrictions and closings that will hamper global recovery if the new virus is less complex but more transmissible. Moreover, commodity markets appear to view new blockades as separate opportunities as oil prices collapse and profitability are limited.
After closing at 113.13 last Friday following a panic-stricken close, the USD/JPY pair has remained largely unchanged this week. Micron is an unsolved issue. In light of the weak USD/JPY support below 113,000 and new economic restrictions possible in many nations, the USD/JPY bias has shifted to the downside. The USD/JPY will quickly regain the initiative if Omicron is widely believed to be no threat.
Despite the US nonfarm payroll report not releasing its baseline forecast of 550,000 new jobs creating 210,000 jobs, the report illustrates how far the job market has come this year.
The unemployment rate fell to 4.5%, and the underemployment rate to 7.8%, significantly better than forecast. In addition, the activity rate rose to 61.8%, the highest level since March 2020.
Key dates/events for the USD/JPY pair
This week, the Omicron saga will be set in motion by Japan and the US economic data.
In Japan, consumer data for the fourth quarter will be released on labor income and total household spending in October. This will be the third consecutive month of decreasing costs. However, the Eco Watchers’ study, which tracks regional economic trends, predicts that the short-term outlook will deteriorate. As a result, PPI is forecast to rise 0.5% to 8.5% in November.
The consumer price index for November will be the main event on Friday in the US. General interest rates will rise from 6.2% to 6.8% and base rates from 4.6% to 4.9%. This will increase the odds of Fed cuts regardless of what happens at Omicron.
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USD/JPY weekly technical forecast: Bears dominating the market
The USD/JPY plunged below the 20-day and 50-day SMAs while the price closed near the weekly lows below the 113.00 mark. The next target for the bears lies at 100-day SMA around 111.65 ahead of 200-day SMA around 110.50. On the upside, the pair may find strong resistance around 20-day SMA near 113.30 ahead of 114.00.
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Saqib Iqbal
