USD/JPY eyes household spending

The Japanese yen is steady on Thursday after showing sharp swings throughout the week. In the North American session, USD/JPY is trading at 156.27, up 0.10% on the day at the time of writing.

Japan’s consumers have been holding tight on the purse strings as inflation remains high and economic conditions remain gloomy. In March, household spending declined to 1.2% m/m, down from 1.4% in February. The downswing is expected to continue, with a market estimate of just 0.2% for April.

Japan’s GDP expected to have contracted

Japan releases GDP on Monday and the markets are bracing for some bad news. Japan’s economy is expected to have contracted in the first quarter, with a market estimate of -0.5% q/q, after no growth in the fourth quarter of 2023. Yearly, the economy is expected to have contracted by 2.0%, after a small gain of 0.4% in the fourth quarter. Private sector demand has fallen and exports are also down.

A weak GDP release could delay any plans at the Bank of Japan to tighten policy. The BoJ meets on June 14th and has hinted that it will take steps on the path towards normalization. The Japanese yen remains at low levels and could lose more ground if the BoJ doesn’t change any policy settings at the meeting.

The US wraps up the week with nonfarm payrolls on Friday and the report is expected to show that the US labor market is slowly cooling off. In April, nonfarm payrolls fell to 175,000 down sharply from 330,000 in March. This marked the weakest job growth in six months. Little change is expected in the May report, with a market estimate of 185,000.
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USD/JPY Technical

• USD/JPY tested support at 155.75 earlier. Below, there is support at 155.01
• 156.86 and 157.60 are the next support levels

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