15 Nov 2024

The Japanese Yen experiences an appreciation as the US Dollar undergoes a downward correction in anticipation of Retail Sales data. For the third quarter, Japan's annualized GDP growth was reported at 0.9%, a decline from the 2.2% growth observed in the second quarter. Kato, a representative from Japan, indicated that measures would be taken to mitigate excessive fluctuations in foreign exchange rates.

On Friday, the Japanese Yen (JPY) rebounded against the US Dollar (USD), ending a four-day decline. Nevertheless, the JPY encountered difficulties following the announcement of Japan's Q3 Gross Domestic Product (GDP) figures. The potential for an increase in the USD/JPY pair was bolstered by the robust performance of the US Dollar (USD). Market participants are also bracing for the upcoming release of the US Retail Sales data for October, scheduled for later on Friday.

Japan's preliminary Gross Domestic Product (GDP) recorded a quarter-on-quarter growth of 0.2% in the third quarter, a decrease from the 0.5% growth in the preceding quarter, aligning with market expectations. The annualized GDP growth for Q3 stood at 0.9%, exceeding the market consensus of 0.7%, yet reflecting a significant slowdown from the 2.2% growth achieved in Q2.

Japan's Finance Minister, Katsunobu Kato, announced on Friday his intention to implement necessary measures to address excessive fluctuations in foreign exchange (FX) rates. Kato underscored the significance of stable FX movements that are aligned with economic fundamentals and expressed his apprehension regarding abrupt, one-sided market shifts.

In a related statement, Japan's Economy Minister, Ryosei Akazawa, conveyed his expectation for a gradual economic recovery, driven by enhancements in employment and wages. However, Akazawa also stressed the importance of vigilant monitoring of potential downside risks stemming from global economic conditions and volatility in financial and capital markets. The Japanese Yen may face depreciation due to a slowdown in domestic economic activities.

The US Dollar Index (DXY), which measures the performance of the US Dollar against six major currencies, is currently trading around 106.70, having retreated from its yearly peak of 107.06 reached on Thursday. This decline may be linked to a slowdown in "Trump trades." On Thursday, Federal Reserve Chair Jerome Powell remarked that the recent performance of the US economy has been "remarkably good," providing the Fed with the opportunity to gradually reduce interest rates. Additionally, Richmond Fed President Thomas Barkin indicated that while the Fed has made significant progress, further efforts are required to maintain the current momentum.

In October, the US Producer Price Index (PPI) increased by 2.4% year-over-year, up from a revised 1.9% rise in September (previously reported as 1.8%) and exceeding market expectations of 2.3%. The Core PPI, which excludes food and energy prices, rose by 3.1% year-over-year, slightly above the anticipated 3.0%.

On Thursday, Bank of Japan Deputy Governor Shinichi Uchida emphasized the necessity for financial institutions and regulatory authorities to be prepared for sudden deposit outflows resulting from digitalization and technological advancements. Uchida also pointed out that the relationship between non-bank financial institutions and the banking sector has strengthened, indicating that any deterioration in the non-bank sector could have repercussions throughout the entire financial system via market channels.

Technical Analysis: USD/JPY rises to near 156.50 as bullish bias prevails

USD/JPY trades around 156.50 on Friday. Daily chart  shows a continued bullish bias, with the pair moving upwards within an ascending channel pattern. The 14-day Relative Strength Index (RSI) is just below the 70 level, supporting the bullish . A breakout above the 70 mark would indicate an overbought condition, potentially leading to a downward correction for the pair.

The USD/JPY pair could target the upper boundary of the ascending channel near the 159.70 level. A breakout above this level would reinforce the bullish sentiment and potentially push the pair toward its four-month high of 161.69, recorded on July 11.

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.