- USD/JPY was knocking on death’s door on Wednesday, testing below the 112 handle and last stop before the cloud base support down at 111.45 but has recovered in style back into the bullish half of the sideways channel.
- The pair is advancing into the end of the week ahead of key US GDP data that will be the ultimate test for the pair.
USD/JPY made a full retracement of yesterday’s NY session losses as Wall Street pares back over 50% of the risk-off market sell-off from Wednesday’s business that saw the DJIA fall as much as 600 points and left the benchmarks in correction territory for the first time in two years.
Today, so far, the DJIA has risen 309 points, or 1.3%, the S&P was up by 42 points, or 1.6% and the Nasdaq Composite Index has climbed 177 points for a return of 2.5%. However, uncertainty and risks simmer away which keeps a lid on USD/JPY rallies and but the yen will struggle after dovish comments from BoJ Deputy Governor Wakatabe.
US GDP snapshot preview:
We now look ahead to the US GDP data and analysts at TD Securities are expecting a 3.7% advance in Q3 GDP, reflecting solid consumer spending (3.3%) and an outsized boost from inventories. “Aside from those categories, however, details are more downbeat with muted business investment and a significant drag from trade. Also in the release is core PCE, which we expect to rise 1.6% q/q, implying a 2.0% y/y print for September.”
USD/JPY levels
On a continuation to the upside, analysts at Commerzbank suggest that rallies need to regain initial resistance offered by the 20 day ma at 112.87 to alleviate downside pressure: “This guards the 114.74 recent high. Above 114.74 would target 118.66, the December 2016 high.”
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