The Japanese Yen (JPY) has been appreciating against the US Dollar (USD), breaking its four-day winning streak on Friday. However, the JPY faced challenges following the release of Japan’s Q3 Gross Domestic Product (GDP) data on Friday. The upside potential of the USD/JPY pair was supported by the strength of the US Dollar (USD). Traders are also preparing for the release of the US October Retail Sales data, due later on Friday. Japan’s preliminary GDP grew by 0.2% quarter-on-quarter in the third quarter, down from 0.5% in the previous quarter, matching market expectations. The country’s annualized GDP growth for Q3 was 0.9%, surpassing the market consensus of 0.7%, but showing a sharp slowdown from the 2.2% growth recorded in Q2.
Japan’s Finance Minister, Katsunobu Kato, stated on Friday that he will take appropriate action against excessive fluctuations in foreign exchange (FX) rates. Kato emphasized the importance of stable FX movements that reflect economic fundamentals and expressed concern over one-sided, sharp shifts in the market. Meanwhile, Japan’s Economy Minister, Ryosei Akazawa, said that he expects a modest economic recovery to continue, fueled by improvements in employment and wages. However, Akazawa also emphasized the need to carefully monitor potential downside risks from global economies and volatility in financial and capital markets.
The US Dollar Index (DXY), which tracks the US Dollar’s performance against six major currencies, trades around 106.70. after pulling back from its yearly high of 107.06 recorded on Thursday. This decline could be attributed to a slowdown in “Trump trades.” On Thursday, Fed Chair Jerome Powell noted that the recent performance of the US economy has been “remarkably good,” allowing the Fed room to gradually lower interest rates. The US Producer Price Index (PPI) rose by 2.4% year-over-year in October, surpassing market expectations. BoJ Deputy Governor Shinichi Uchida highlighted the need for financial institutions and authorities to be prepared for sudden deposit outflows due to digitalization and technological advances. BoJ’s Summary of Opinions from its October meeting highlighted division among policymakers regarding additional rate hikes.
Technical Analysis shows that the USD/JPY pair could target the upper boundary of the ascending channel near the 159.70 level. On the downside, the USD/JPY pair could find support at the nine-day Exponential Moving Average (EMA) around 154.65, followed by the lower boundary of the ascending channel at 153.90. The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today, with the Japanese Yen being the strongest against the US Dollar.
In conclusion, the Japanese Yen has been gaining ground against the US Dollar, supported by Japan’s Q3 GDP data and statements from Japanese officials. The US Dollar has been facing challenges due to a slowdown in “Trump trades” and a shift in Fed interest rate policy. Technical analysis suggests a bullish bias for the USD/JPY pair, with potential targets and support levels identified. Overall, the foreign exchange market remains volatile, and traders need to monitor economic data releases and central bank statements for further insights into currency movements.
