- Consumer spending in Japan declined for the 13th month in March.
- Economists in a Reuters poll expect Japan’s economy to shrink in Q1.
- There was an unexpected increase in US initial unemployment claims last week.
The latest USD/JPY price analysis indicates a bullish trend as the yen weakens following a drop in Japan’s consumer spending for March. The disappointing report has clouded the outlook for potential rate hikes by the Bank of Japan.
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Data on Friday showed that consumer spending in Japan declined for the 13th month in March. Weak spending could be a sign that consumers are not earning as much. Therefore, prices will remain low, challenging the Bank of Japan’s outlook for rate hikes. In the previous session, data revealed that real wages in Japan fell two years in a row, another challenge for the Bank of Japan.
Meanwhile, economists in a Reuters poll expect Japan’s economy to shrink in the first quarter of 2024 due to weak demand. These are all bearish for the yen which is struggling at a weak position against the dollar.
Notably, most major currencies gained against the dollar overnight after poor US employment data. However, the yen remained weak, which raised concerns that Japanese authorities might intervene again to support their currency.
Data on Thursday revealed an unexpected increase in US initial unemployment claims, raising hopes for policymakers that the labor market is finally cracking. Recent labor market data has all surprised to the downside and increased bets that the Fed will cut rates in September. Moreover, there is a higher chance that the central bank will implement two rate hikes in 2024.
USD/JPY key events today
- US UoM consumer sentiment
USD/JPY technical price analysis: Bulls rest after a strong move to the 156.00 level
On the technical side, the USD/JPY price has paused below the 156.00 resistance level. However, the bullish bias is strong because it trades above the 30-SMA with the RSI in the bullish region above 50. This pause comes after an impulsive move that saw the price break out of its bearish channel.
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Bulls have paused to rest as the 30-SMA catches up with the price. When it does, USD/JPY will likely break above 156.00 to retest the 158.00 resistance level. The bullish bias will remain if the price stays above the 30-SMA.
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Saqib Iqbal
