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Japan’s Finance Ministry is up for releasing the preliminary reading of the second quarter (Q2) 2020 Gross Domestic Product (GDP) figures at 23:50 GMT on Sunday, early Monday morning in Asia.

Market consensus bears the burden of the coronavirus (COVID-19) outbreak while suggesting a contraction of 7.6% QoQ and 27.2% YoY figures versus respective prior of -0.6% and -2.2%. Considering the Bank of Japan’s (BOJ) readiness to adopt unconventional monetary policy tools should the economy deteriorate, today’s GDP becomes the key for the USD/JPY traders.

How could it affect USD/JPY?

In its July month’s meeting, the BOJ’s nine-member board warned of risks to Japan’s economic outlook, including the chance that its recovery may be delayed and lead to job losses if the pandemic drags on, as per the summary. Though, the policymakers also remained hopeful for recovery in the second half of the year depending upon the pandemic’s impact on inflation, growth expectations.

That said, while the further weakening of GDP could continue exerting downside pressure on the Japanese yen, upbeat readings are less likely to have a longer-lasting positive impact. Even so, the present risk aversion, mainly due to the US-China tension and virus outbreak fears, not to forget about the American stimulus deadlock, could help the Japanese yen to be at a lesser loss.

USD/JPY stays on the back foot around 106.60 by the press time. While 106.40 and 21-day SMA near 106.10 offer immediate support to the quote, 107.00 and 100-day SMA near 107.20 could challenge buyers during the pair’s upside attempts.

Key Notes

USD/JPY Forecast: Risk of a bearish extension once below 106.35

About the Japanese Q2 Preliminary GDP

The Gross Domestic Product released by the Cabinet Office shows the monetary value of all the goods, services and structures produced in Japan within a given period of time. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the JPY, while a low reading is negative.