USD/JPY stays pressured towards 136.00 on downbeat yields, firmer Japan GDP
|- USD/JPY holds lower ground after reversing from weekly top the previous day.
- Final readings of Japan’s Q3 GDP improved to -0.2% QoQ.
- US Treasury yields slumped on recession fears, downbeat US data.
USD/JPY remains on the back foot, around 136.40, after witnessing downbeat data from Japan early Thursday in Tokyo. Even so, the Yen pair remains mostly sidelined, maybe due to the initial trading hours, after reversing from the one-week high on Wednesday.
Japan’s final readings of the third quarter (Q3) Gross Domestic Product (GDP) came in better than initial forecasts as the QoQ figures improved to -0.2% versus -0.3%, while the GDP Annualized came in -0.8% versus -1.1% expected and -1.2% prior.
In addition to the firmer Japan data, downbeat US Treasury yields and softer US data also weigh on the USD/JPY prices.
That said, the benchmark 10-year Treasury bond yields dropped to the lowest since early September by losing 3.30% on Wednesday, close to the 3.43% level at the latest. Further, the two-year counterpart dropped 2.54%, near the 4.26% mark by the press time. With this, the US Treasury bond yield curve, the difference between the long-dated and the short-term bond yields, inverted the most in over forty years.
On the other hand, the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior. Further, the final readings of the Unit Labour for Q3 eased to 2.4% QoQ versus 3.5% first estimations.
On a different page, the latest fears emanating from China and Russia also exert downside pressure on the USD/JPY prices.
Bloomberg came out with the news suggesting more tension between the US and China due to the latest bills the US Congress is up for passing. “The US is set to pass legislation revamping US policy toward Taiwan and restricting government use of Chinese semiconductors, moves that appear certain to antagonize Beijing even as President Joe Biden seeks to ease tensions,” said Bloomberg.
Elsewhere, Russian President Vladimir Putin teased a nuclear war by saying that nuclear weapons could be used to defend itself and its allies.
Alternatively, China’s easing of the Zero-Covid policy and the recent pause in the US Treasury yields seemed to have challenged the USD/JPY bears ahead of a light calendar.
Technical analysis
A 12-day-old descending resistance line near 137.50 restricts immediate USD/JPY upside, which in turn joins downbeat MACD and RSI (14) to direct sellers towards the 200-DMA re-test, around 134.95 by the press time.
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