USD/JPY hit 15-week high, Japan GDP next

The Japanese yen is lower for a fourth straight trading day and has declined 2.1% during that time. In the North American session, USD/JPY is trading at 155.85 up 0.25% on the day.

Japan GDP expected to decelerate in Q3

The markets are braced for a sharp slowdown in third-quarter GDP, which will be released early Friday. The market estimate stands at 0.7% y/y, compared to a revised 3.1% in the second quarter. On a quarterly basis, GDP is expected to ease to 0.2%, following a revised 0.7% gain in Q2. The strong GDP numbers in the second quarter reflected wage negotiations in the spring which resulted in sharp wage increases and a recovery in the auto industry.

The BoJ meets next on Dec. 19 and key data such as the GDP release and inflation will be important factors ahead of the meeting. As well, wages have been rising which could translate into increased consumer spending and demand-driven inflation.

In the US, the Producer Price Index (PPI) rose in October to 2.4% y/y, up from a revised 1.9% gain in September. The core rate also rose to 3.1% from a revised 2.9% in September. The increase in PPI comes on the heels of consumer inflation (CPI) which rose from 2.4% y/y to 2.6%. The core rate remained unchanged at 3.3%.

The Federal Reserve is unlikely to change its plans due to the rise in inflation, which had decelerated for six straight months. The path of inflation can be bumpy and Fed policymakers won’t be losing sleep over a single monthly increase. If inflation accelerates next month, however, there will be some concern and we could hear calls for an oversized half-point cut in December.

USD/JPY Technical

• USD is testing resistance at 155.95. Above, there is resistance at 1.5643
• There is support at 155.15 and 154.67

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