USD/JPY is steady in Tokyo despite the Japanese data dump, poised to extend its decline

  • USD/JPY is steady in Tokyo despite the Japanese data dump following a better bid day overnight for the yen as the top performer within the G10 FX space.
  • USD/JPY is currently trading at 111.52 between an Asian range of 111.47 and 111.61. 

The yen was the best performer in the G10 and despite robust DXY, USD/JPY dropped from 112.20 in Tokyo trade to 111.38 in London, marking a 2 week low on the charts. Despite the Bank of Japan making only minor tweaks to its policy stance yesterday when it published a lower GDP and CPI forecasts in the quarterly outlook. However, what was surprising was is that the BoJ is now saying they "will keep very low-interest rates levels for an extended period of time at least through to around spring 2020" - That is more specific, where otherwise,  there was no time frame given until now.

Japanese data to support yen

As for Japanese data, it was not a market mover yet again, as per usual, but there were some improvements in the data that should be supportive to the yen:

  • Japanese Jobless Rate for March comes in higher at 2.5% - expected 2.4%, prior was 2.3%. 
  • Retail sales for March +0.2% m/m - m/m expected 0.0%, prior was 0.4% 1.0% y/y - expected 0.8%, prior was 0.6% Beating estimates.
  • Tokyo CPI 1.4% y/y, expected 1.1%, prior was 0.9%.
  • Tokyo CPI excluding Fresh Food 1.3% y/y, expected 1.1%, prior was 1.1%.
  • Tokyo CPI excluding Food, Energy 0.9% y/y, expected 0.7%, prior was 0.7%.
  • However, Industrial Production m/m for March (preliminary reading) came in at -0.9%, expected 0.0%, and prior was 0.7% - not good along with -4.6% y/y (preliminary) vs expected -3.8%, and prior was -1.1

Meanwhile, and as for US yields, the US 10yr treasury yield consolidated a multi-day decline, ranging sideways between 2.52% and 2.54% and the probability of a Fed rate cut by December, implied by Fed fund futures, climbed from 70% two days ago to 80%.

Looking ahead

As for data, looking ahead, the USD and global outlook will depend on 1) US - advance Q1 US GDP, 2) FOMC, 3) ISM and 4) payrolls; 5) Eurozone - Q1 GDP, final 6) April PMIs and 7) April advance CPI data; and 8) China – NBS and Caixin PMIs.

USD/JPY levels

Valeria Bednarik, Chief Analyst at FXStreet explained that from a technical point of view, the pair is poised to extend its decline after the failed attempt to break higher ended with it settling below the base of its latest range:

"In the 4 hours chart, the pair is now below its 20 and 100 SMA, while the 200 SMA offered an intraday dynamic support at around the daily low, still lacking directional strength and therefore relevance. Technical indicators maintain sharp downward slopes at their lowest in two weeks, also skewing the risk toward the downside."

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