Will The Gains Be Limited?
After sulking in the defensive ground for almost a week, the Japanese yen found a breather and edged a tad higher against the US dollar. The weaker-than-expected growth increase of Japan provided an initial support to the currency after the opening bell on Thursday. Nonetheless, the gains were likely limited as the greenback may take back the throne ahead of US jobless claims and consumer sentiment reports.
USD/JPY Movement
The Japanese yen gained 0.25 percent against the greenback to trade at 113.48 as of 14:14 UTC. USD/JPY opened at 113.425 with a session high of 113.471 and a session low of 113.406. The pair found resistance at 113.588 and support at 113.314.
As the graph shows, the pair was trading below its 20-day 113.592 SMA of and 50-day SMA of 113.842, sending a negative notion in the future trend of the pair. Since, the USD subdued against the yen, the strength of the latter is apparent.
During the mid-session, the pair went beyond the lower barrier, but the band was likely expanding. Thus, it is reasonable that there will be a high volatility on the way. However, USD/JPY may trade between the range of 113.645 to 113.275.
In a wider view, USD/JPY was still on the offensive track. The pair used to wallow on 110.000 level last month, therefore, the 113.000 level at the moment was not really alarming for the greenback. Also, the US jobless claims and consumer sentiment reports will be released before the end of the week.
These data can be a make or break in the current stance of the greenback.
If a breakthrough happens within the trading session, the new resistance would be 113.703. On the other hand, if a fall through occurs, the support would stand at 113.190, still a tight trading range for the pair.
Japan’s Third Quarter Growth
Far from the expectation of the market, the growth of Japanese economy only rose by 1.3 percent on an annual basis in the September quarter. The Cabinet office released the data earlier today, which underpinned the growth outlook for the nation. The figure failed to meet the revised 2.2 percent growth expectation and even went half of the annual expansion estimate of 2.4 percent.
Based on the data, the domestic demand failed to boost the economy while household consumption rose 0.3 percent. Capital expenditure dropped 0.4 percent as the investment in steel and real estate started to decline.
However, private residential investment advanced 2.6 percent, but still, the non-residential investment slid 0.4 percent. In the preliminary estimate, public investment stood at -0.7 percent, but it managed to go up to 0.1 percent.
The trading sector turned out to be steady as well. The report showed that external demand advanced 0.3 percent, lower than the expected 0.5 percent.
The exports of goods and services rose 1.6 percent, while imports plummeted by 0.4 percent.
Meanwhile, the Japanese equities have been performing well after president elect Donald Trump announced that telco would invest $50 billion in the US which made Japan’s Sofbank soar for almost 3.61 percent.
At the time of writing, Nikkei 225 rallied 1.45 percent to 18,765.47 led by the gains in the shipbuilding and finance & Investment sectors.
The slight improvement of the nation’s economy supports the likelihood of a rate increase. Since a rate increase leads to currency appreciation, the yen apparently moved higher. The Bank of Japan has kept its lower official cash rates to meet its price stability target of 2 percent and as the bank implements its quantitative and qualitative monetary easing with yield curve control program.
After the market opened, BOJ Governor called the attention of the companies to their investment to the next level amid the modest growth of the economy. Kuroda noted that the nation was in the critical stage as the global economy dealt with several political changes. The governor kept his optimism towards the slow pace growth of Japan’s economy.