- USD/JPY is showing resilience to upbeat Japanese household spending data.
- Markets likely expect household spending to drop over the coming months.
- Bids for JPY remain elusive amid the rally in risky assets and Nikkei’s rise to one-year highs.
USD/JPY is seeing little action in the Asian session, as an upbeat Japanese data is struggling to put a bid under JPY, possibly due to risk-on in the equity markets.
The currency pair is currently trading in a sideways manner around 109.27, having hit a high of 109.49 in the overnight trade.
Japan’s Household Spending jumped 9.5% year-on-year in September, beating the expected rise of 7.8% by a big margin and up significantly from the preceding month’s 1% rise. Labor Cash Earnings also rose 0.8% in annualized terms, bettering the 0.4% estimate.
The Yen, however, is not impressed, possibly due to fears that consumers spent more ahead of the October tax hike and may tighten their purse strings going forward. Notably, spending had spiked 7.2% in March 2014, a month ahead of the previous sales tax increase, only to fall sharply and stay negative more than a year, as per Reuters.
Traders, therefore, are right in being reluctant to bid for JPY – more so, as risky assets are flashing green. Japan’s Nikkei index is currently trading at 23,550, the highest level since Oct. 10, 2018. The S&P 500 futures are also reporting a 0.11% gain, possibly on the US-China trade optimism.
Looking forward, the pair may continue to track the action in the major equity markets and US treasury yields. The 10-year yield rose to 1.97% in the overnight trade to clock three-month highs. China’s trade data could also influence demand for the anti-risk JPY.
Technical levels
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