USD/JPY steadies above 108.50, adds 100 pips for the week

• 10-year US T-bond yield stays flat on Friday.
• First estimate of Q2 GDP comes in at 2.1% in US.
• USD/JPY looks to post highest weekly-close in two months.

The USD/JPY pair showed some wild swings during the early trading hours of the American session but didn’t make a consistent-enough move in  either direction and went into a consolidation phase above 108.50. As of writing, the pair was up only 0.08% on the day at 108.70 but was adding 100 pips for the week.

According to the US Bureau of Economic Analysis’ first estimate, the real GDP in the US expanded by 2.1% annually in the second quarter following the first quarter’s impressive 3.1% growth. However, the fact that this reading came higher than analysts’ estimate of 1.8% allowed the USD to gather strength against its rivals.

GDP data doesn’t impact Fed rate cut odds

Assessing the data,  “While inventories and trade provided the expected drag on GDP, domestic demand offered more than just an offset courtesy of consumption and unexpected strength for government spending ─ the latter’s contribution was actually the biggest in a decade reflecting perhaps a catch up after the shutdown of government in early parts of the prior quarter,” said  analysts at National Bank of Canada.

Meanwhile, the CME FedWatch Tool’s probability of a 25 basis points rate cut next week remained unchanged above 80%, suggesting that the GDP data had little to no impact on rate cut expectations. As a result, the 10-year Treasury bond continued to move sideways, not providing any directional clues to the pair.

Technical levels to watch for