USD/JPY retreats towards 133.00 on softer Japan GDP, yields ahead of Fed Minutes
|- USD/JPY takes offers to refresh intraday low, snaps two-day uptrend.
- Japan’s Q2 GDP grew less than expected but stayed firmer than previous readouts.
- Market sentiment dwindles as Fedspeak resist welcoming softer US inflation.
- FOMC Minutes will be important for clear directions; US-China headlines may entertain traders.
USD/JPY refreshes intraday low around 133.20 as Tokyo opens on Monday. In doing so, the yen pair justifies mixed Gross Domestic Product (GDP) data for the second quarter (Q2) and a lack of clarity on the macro front.
That said, preliminary readings of Japan’s Q2 GDP appeared at 0.5% QoQ versus 0.6% expected and -0.1% prior. Further, the GDP Annualized eased below 2.5% expected to 2.2%, versus -0.5% prior.
Elsewhere, the US Treasury yields remain pressured at around 2.84% as Fed policymakers remain hawkish, suggesting further hardships for optimists offering less aggressive rate hikes and fewer challenges to economic growth. Also challenging the yields and the USD/JPY traders are the mixed headlines surrounding the US and China.
The USD/JPY pair’s latest weakness justifies the softer US dollar amid downbeat inflation data. The reason could be linked to the hawkish comments from the Fed policymakers.
Chatters of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), appeared to have favored the risk-on mood. Also positive for the mood were headlines suggesting improved coronavirus conditions in China's financial hub Shanghai. However, the increased number of US lawmakers visiting Taiwan challenges the sentiment.
On Friday, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said he wants to raise interest rates further to bring inflation under control. Even so, the policymaker added that he would watch the US economic data to decide how big a rate hike to support at the Fed's next meeting in September. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters.
Amid these plays, S&P 500 Futures print 0.25% intraday losses while Japan’s Nikkei 225 rises 0.65% on a day by the press time. It’s worth noting that Wall Street rallied on Friday.
China’s monthly Retail Sales and Industrial Production for July will offer immediate directions to the USD/JPY traders. However, major attention will be given to the Federal Open Market Committee (FOMC) Minutes.
Technical analysis
USD/JPY remains sidelined until crossing the 13-day-old symmetrical triangle, currently between 132.35 and 134.45.
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