USDJPY rebounds firmly from 140.00 on Japan’s negative GDP, US Retail Sales eyed

The USDJPY pair has delivered an upside break of the consolidation formed in a 140.00-140.20 range after the Japanese Cabinet Office reported a negative growth rate in economic activities. Earlier, the asset displayed a sideways performance above the psychological resistance of 140.00 in the Asian session after rebounding from 139.65.

The Japanese economy has displayed a de-growth of 0.3% in the third quarter against expectations of a growth rate of 0.3% and the prior release of 0.9%. On an annualized basis, the economic catalyst has displayed a negative growth rate at 1.2% against an expansion of 1.1% as expected and the prior release of 3.5%.

Earlier, Analysts at ING were expecting the third quarter GDP is expected to grow 0.5% QoQ, seasonally adjusted, which is a slower pace than the previous quarter. Reopening effects still led the overall growth but higher inflation and the weak yen partially offset the recovery.”

A release of the negative growth rates has brought volatility in the Japanese yen. On Monday, Bank of Japan (BOJ) Governor Haruhiko Kuroda cited that the economy is on track for recovery. He stated that the economy is likely to recover as the impact of supply constraints and the pandemic have eased. The tight labor market will drive wages and the inflation rate to grow around 3% this fiscal year.

Meanwhile, the US dollar index (DXY) has inclined to near the round-level resistance of 107.00. Market mood is displaying mixed responses as the S&P500 futures have reflected a recovery after a weak Monday.

Going forward, the US Retail Sales data will remain in the spotlight, which is due on Wednesday. The monthly data is seen higher at 0.9% vs. the prior release of 0%. An incline in retail demand in spite of a monthly decline in price pressures indicates solid retail demand by households.