USD/JPY finds interim support near 149.50 as US Dollar recovers, US Q3 GDP in focus

• USD/JPY discovers an interim support near 149.50 after recovery in the US Dollar.
• Economists expect that the US economy grew by 4.2% in the third quarter of 2023.
• The BoJ announced that it will conduct an unscheduled bond operation on Wednesday.

The USD/JPY pair discovered interim support near 149.50 after correcting from the crucial resistance of 150.00 in the European session. The asset finds bids after the US Dollar recovered strongly from 105.40 as the focus shifts to a string of United States economic readings, which will be released this week.

S&P500 futures generated significant gains in the London session, portraying a cheerful market mood. The delay in Israel’s ground assault in Gaza has improved the market sentiment while the near-term mood remains risk-off amid persistent risks of widening Middle East conflicts.

The US Dollar recovered on expectations that upbeat Q3 Gross Domestic Product (GDP) data, which will be published on Thursday, would increase hopes of further policy tightening by the Federal Reserve (Fed). As per the expectations, the US economy grew strongly 4.2% against a 2.1% increase recorded earlier. The 10-year US Treasury yields edged down to 4.83% as Fed policymakers continue to deliver neutral guidance on interest rates.

Meanwhile, investors await the speech from Fed Chair Jerome Powell, which is scheduled for Wednesday. Jerome Powell is expected to reiterate the need to keep interest rates unchanged in the 5.25-5.50% range but will keep doors open for further policy tightening as the US economy is resilient on the grounds of labor market and consumer spending.

On the Japanese Yen front, the Bank of Japan (BoJ) announced that it will conduct an unscheduled bond operation on Wednesday in which it will offer to buy JPY300 billion yen ($2.00 billion) in Japanese government bonds (JGBs) having maturities of five to 10 years and 100 billion worth of yen with maturities of 10-25 years.