Japanese Nikkei declined against the US dollar during the Asian session Tuesday. This move can be related to the firmer US Treasury yields and the risk-off market mood.

The US Treasury yields posted 2.3 basis points (bps) of an upside to 1.42% after declining to the monthly lows.

On the other hand, Japanese policymakers are about to revise the Financial Year (FY) 2022 GDP forecast hoping for relief from a multi-billion dollar worth of budget. As per a recent news, It was reported that “Japan is considering raising its forecast for fiscal 2022 real gross domestic product (GDP) growth to 3.0% or more after taking into account the impact of a record $317 billion extra budget.

The projection would be an upgrade from a forecast for 2.2% real GDP growth for the fiscal year starting in April 2022 released at a mid-year review in July. The cabinet was set to approve the new forecast, which comes after parliament on Monday approved the 36 trillion yen ($316.73 billion) extra budget for the current fiscal year, on Thursday.”

The Omicron woes creates a risk off mood in the market. World Health Organization (WHO), the US Centers for Disease Control and Prevention (CDC) and the Imperial College of London have highlighted fears of the South African covid variant, named as Omicron.

As per reuters WHO said, “The Omicron variant of the coronavirus is spreading faster than the Delta variant and is causing infections in people already vaccinated or who have recovered from the COVID-19 disease.”

The US CDC and the UK Scientists were also fearful of the virus variant. The former said, “Omicron is now the most common coronavirus variant in the US, accounting for nearly three-quarters of COVID-19 cases,” while the latter mentioned, per Reuters, “Infections caused by the Omicron variant of the coronavirus do not appear to be less severe than infections from Delta.”

It has to be noted that Friday’s comments from Fed Board of Governors member Christopher Waller renewed the call for the Fed-rate-hike and favored the US dollar. As per reuters policymakers said “The ‘whole point’ of the Fed’s decision to accelerate the pace of its QE taper was to make the March Fed meeting “live” for a first rate hike.”

USD/JPY 4 Hour Chart:

Support: 113.33 (S1), 113.13 (S2), 112.93 (S3).

Resistance: 113.74 (R1), 113.94 (R2), 114.14 (R3).

A light calendar and the year-end holiday mood may restrict USD/JPY moves. However amidst all the catalysts framing a favorable environment for dollar now, we expect a bullish trend for USD/JPY.