Japan GDP beats forecast, yen ends skid

The Japanese yen is in positive territory today, putting the brakes on a four-day skid. In the European session, USD/JPY is trading at 155.54 down 0.45% on the day.

Japan GDP climbs 0.9%

Japan’s economy expanded by 0.9% in the third quarter, below the revised 2.2% gain in Q2 but above the market estimate of 0.7%. Quarterly, GDP rose 0.2%, lower than the 0.5% gain in Q2 and matching expectations.

The GDP numbers were not sparkling but point to a second straight quarter of growth. August economic activity was dampened due to a “megaquake” alert and a fierce typhoon which caused widespread destruction and disruption.

Private consumption, which comprises more than half of the country’s GDP showed strong growth of 3.6% y/y, despite the weather issues. This is an encouraging sign for the Bank of Japan, which wants to see inflation rise to demand and consumption. The BoJ has been vague about the timing of a rate hike but the markets are looking at December or January as likely dates. The yen has been wobbly and is down 2.3% in November. If the yen’s downswing continues, the BoJ could decide to hike rates at the Dec. 19 meeting. There is also the possibility of the Ministry of Finance intervening in the currency markets if the yen declines sharply.

The US wraps up the week with retail sales for October, with a market estimate of 1.9%. Retails sales eased to 1.7% y/y in September, which was an 8-month low. Monthly, retail sales are expected to inch up to 0.4% from 0.3%. Consumer spending has been generally strong and consumer confidence should improve now that the uncertainty over the US election is over.

USD/JPY Technical

• USD/JPY has pushed below support at 1.5601 and is testing 1.5560. The next support line is 1.5493
• 1.5668 and 1.5709 are the next resistance lines

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