The weakness of the Japanese yen (the traditional safe haven) allowed the USD/JPY to hold on to the gains of the recent bullish rebound to the resistance level of 114.95, the highest in a month, where it has settled as of this writing. Investors' appetite for risk increased amid reports about the weak health impact of the new Corona variant, Omicron. This week, the Chinese city of Xi'an recorded 175 local infections with the Coronavirus, while battling an outbreak of the Coronavirus that pushed daily cases in China to record levels since early last year.
The number of reported infections in Xi, in the northwestern Shaanxi Province, increased from 162 on Sunday, and 158 the day before, according to a government notification issued on Tuesday. The authorities blame the outbreak on the delta variable. Authorities locked down 13 million residents in Xi'an amid increasing infections in an attempt to limit the spread of the disease. China is one of the few remaining countries to follow a "zero Covid" policy, with authorities carrying out mass testing when infections are found in the community. Xi'an has so far conducted four mandatory rounds of testing as authorities seek to detect new infections. The city also launched a disinfection campaign, in which roads and buildings were sprayed.
In contrast, the decision by US health officials to shorten the recommended COVID-19 isolation and quarantine period from 10 days to five has drawn criticism from some medical experts and could create confusion among many Americans. To the chagrin of some authorities, the new guidelines allow people to leave isolation without being tested to see if they are still contagious.
The directive has raised questions about how it was made and why it has been changed now, in the midst of another spike in winter cases, and this one is largely driven by the highly contagious omicron variant. The measure taken by the Centers for Disease Control and Prevention on Monday has cut in half the recommended isolation time for Americans who have coronavirus but do not have symptoms. Similarly, the CDC has shortened the amount of time people who have been in close contact with an infected person need to be quarantined.
The new guidance was issued amid warnings from the business community that a sudden rise in cases could soon cause a massive staff shortage as workers are forced to stay at home. Already, thousands of flights have been canceled over the past few days in a mess that has been blamed on the novel coronavirus variant, Omicron.
The movement of the bulls towards the 115.20 resistance, is currently pushing the technical indicators towards strong overbought levels. Above there would be a good selling opportunity. This week’s movements are not a measure of the market in general, but rather a result of the holidays, poor liquidity and reluctance of investors. Global restrictions to contain the epidemic weaken the future of the global economic recovery, and thus investors may return to safe havens, with the Japanese yen one of the most important ones.
Support levels 114.10 and 113.35 are the most important for the bears to reach to regain control of the performance again. The currency pair will be affected today by risk appetite or lack thereof, as well as the reaction to the announcement of the number of US pending home sales.