USD/JPY: Bears dominate near multi-year low after Japan GDP matches forecast

• USD/JPY remains on the back foot as Japan’s Q4 Final GDP matches downbeat expectations.
• Coronavirus exerts downside pressure on the pair, expectations of another rate cut from the Fed add strength into the bearish momentum.
• Second-tier data from Japan can offer intermediate direction, COVID-19 will remain as the key catalyst.

USD/JPY holds onto 1.50% losses, marking 103.90 as a quote, after the final reading of Japan’s fourth quarter (Q4) GDP matched downbeat forecast during Monday’s Asian session.

Read: Breaking: Japanese GDP (QoQ) (Q4): -1.7%  vs -1.7% exp, -1.6% prior

The headlines growth figure confirms the -1.7% market consensus versus -1.6% initial forecast. The GDP data confirms further challenges to the Asian economy amid coronavirus (COVID-19) fears that have been dragging to the quote downwards.

That said, the US 10-year treasury yields drop to the fresh record low of 0.501% while S&P 500 Futures drop 4.74% to 2,823, down 140 points, by the press time.

On Friday, Japan’s Economy Minister Nishimura and Finance Minister Taro Aso both accepted growing challenges to the Japanese economy due to the deadly virus while also showing readiness to act if needed. Earlier, Japan’s Prime Minister Shinzo Abe also signaled that the Asian nation stays ready to act but suggested no strong measures. However, nothing stops the Reuters poll to anticipate further monetary easing from the BOJ in March.

On the contrary, the US Federal Reserve policymakers are trying to turn down the odds of another rate cut in the current month after recently taking the Fed rate down by 50 basis points (bps). Though, Westpac said, “Markets are pricing a 100% chance of a 50bp cut at the next FOMC meeting on 18 March, and a terminal rate of 0.24% (vs Fed’s mid-rate at 1.13% and effective FFR 1.09% currently).”

As per the positioning data is for the week ending 3 March 2020, analysts at the Australia and New Zealand Banking Group (ANZ) said that Further buying of the safe-haven currencies can be expected if the risk complex around COVID-19 aggravates.

While coronavirus headlines continue to take the driver’s seat, Japan’s Eco Watchers Survey for February, up for publishing around 05:00 GMT, may offer intermediate direction. It should be noted that there are no major data/events from the US to watch.

Technical Analysis

November 2016 low surrounding 102.80/70 holds the key to the pair’s fall towards 100.00 psychological magnet, also comprising lows marked during September 2016. Alternatively, any recovery beyond October 2019 bottom bear 106.50 is less likely to recall the buyers.