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Market Insights

USD/JPY shrugs off Japan’s GDP miss - Can bulls clear 148.00?

Trading insights: EUR/USD, GBP/USD extend losses, oil prices rise

USD/JPY Outlook:

  • Japan GDP annualised growth rate (Q2) misses expectations, printing at 4.8% vs 5.5% forecast.
  • USD/JPY steadies as the upper bound of the rising wedge holds firm
  • How will USD/JPY react to next week’s event risk?

USD/JPY Price Analysis

USD/JPY is currently trading at a critical juncture that could influence the direction and momentum of the trend in the upcoming weeks.

With interest rate expectations and the Fed’s aggressive monetary policy tightening supporting US dollar strength, Japan’s ultra loose policy has continued to weigh on the Yen.

As USD/JPY returns to levels last seen in November last year, the impressive 12% year to date (YTD) rally may be losing steam. After temporarily testing the upper bound of the rising wedge formation earlier this week, prices peaked at a high of 147.874 before slipping back toward psychological support, currently holding at 147.00.

USD/JPY daily chart

USDJPY
Chart prepared using TradingView

USD/JPY levels to watch

While the pair searches for a fresh bout of momentum, a potential dragonfly doji is in the process of forming on the daily chart, indicative of a firm zone of support.

For bulls to regain confidence, prices would need to clear the weekly high and hold above the next barrier of resistance at 148.00, which may allow USD/JPY to retest the 88% Fibonacci of the 2020 - 2022 move around the 149.00 mark.

In contrast, a move below 147.00 and a break of the 20 - day MA zone of support at 146.20 could open the door for a sharper correction toward the September low of 144.446.

Looking at the fundamental risks for the week ahead, a plethora of data points could contribute to driving price action out of the current range.

With the data points below all considered to be high impact events that provide insight into the performance and expectations for the global growth outlook, influencing demand for the safe-haven dollar.

However, if US economic data underperforms and the Fed is expected to end the rate hiking cycle, it may be possible for JPY to gain some ground.

Economic events for the week of September 11 - September 15

  • Monday: China new Yuan loans (Aug)
  • Tuesday: UK employment data, Euro Area & German ZEW economic sentiment index (Sep)
  • Wednesday: UK GDP, US inflation data
  • Thursday: ECB rate decision, US retail sales and PPI
  • Friday: China industrial production and retail sales. US manufacturing index, consumer sentiment and inflation expectations.

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Not investment advice. Past performance does not guarantee or predict future performance.