After the announcement of Japan GDP USDJPY lost traction.
USDJPY pair reverses an Asian session decline to the 146.60-146.55 zone. Reflecting the 200-hour Simple Moving Average (SMA). And rallies to a new daily high. Spot prices are now trading at 147.25-147.20, essentially steady for the day. And appear to have paused this week’s corrective drop from the highest level since November 2022 for the time being.
Fears of intervention keep bulls from putting new wagers in the face of a slight USD decline.
The Japanese yen (USDJPY) is falling in value across the board. In response to a weaker adjustment of second-quarter GDP growth. Which turns out to be a crucial element that helps the USDJPY pair attract some dip-buying on the last day of the week. In fact, the world’s third-largest economy grew at a 4.8% annualized rate from April to June, down from a prior estimate of 6.0%.
The policy difference between the Fed and the BoJ implies that the route of USDJPY least resistance is to the upside.
The data emphasizes Japan’s precarious economic status and assures. That the Bank of Japan (BoJ) will maintain its ultra loose monetary policy settings.
This, together with indicators of equities market stability, weakens the JPY’s safe-haven position and gives support to the USDJPY pair. However, concerns that the Japanese government may interfere in the foreign exchange market to support the native currency should be avoided. JPY losses should be limited. Indeed, BoJ board member Junko Nakagawa stated that currency movements should be consistent with economic and financial fundamentals. Aside from that, a slight US Dollar (USD) fall from a six-month high contributes to the major’s gains being limited.
Meanwhile, attitude toward the USD remains optimistic, owing to increased agreement. That the Federal Reserve (Fed) will keep rates higher for longer, and wagers on another 25 basis point hike in 2023. This represents a significant departure from the BoJ’s dovish position and implies that the path of least resistance for the USDJPY is to the upside. As a result, any major corrective downturn might still be viewed as a buying opportunity. In the absence of any significant data from the US on Friday, is more likely to stay constrained.
