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Japanese Yen Prices Fall, USD/JPY Rally May Extend on China GDP

Japanese Yen Prices Fall, USD/JPY Rally May Extend on China GDP

2020-01-17 00:00:00
Daniel Dubrovsky, Analyst
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Japanese Yen, USD/JPY, China GDP, S&P 500 – Asia Pacific Market Open

  • Anti-risk Japanese Yen depreciates as U.S. retail sales sends S&P 500 higher
  • US Dollar flat, emerging markets diverge from Wall Street despite trade deal
  • China Q4 GDP may sink JPY further as USD/JPY eyes highs from May 2019

Japanese Yen Sinks as S&P 500 Soars on U.S. Retail Sales, US Dollar Flat

The anti-risk Japanese Yen underperformed against most of its major counterparts on Thursday while the US Dollar ended relatively flat. Better-than-expected retail sales out of the United States offered a boost to the Greenback and local government bond yields. USD cautiously weakened into the data release however, hence its flat overall performance. The S&P 500 and Dow Jones charged higher, rallying 0.84% and 0.92% respectively.

Curiously, the pro-risk Australian Dollar and New Zealand Dollar struggled to capitalize on the “risk-on” market tone. That may reflect the Greenback’s ultimate yield advantage over AUD and NZD, making it relatively more attractive when investor confidence is uplifted. Sentiment-linked crude oil prices on the other hand followed the rally in stocks.

There was a divergence between Wall Street and the MSCI Emerging Markets Index (EEM). The latter ended flat after an upside gap and intraday swings in volatility. The EEM has been struggling to capitalize on gains despite the US-China “phase one” trade agreement which might reflect doubts over a “phase two” accord. Better data out of the US may decrease dovish Fed policy bets, a worrying prospect for certain ASEAN economies.

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Friday’s Asia Pacific Trading Session

Attention turns to fourth-quarter Chinese GDP data, which is due at 2:00 GMT during Friday’s Asia Pacific trading session. Data out of the world’s second-largest economy has been tending to surprise to the upside as of late. That may pave the way for a similar print later today. China’s economy is expected to grow 6.0 percent y/y, the same pace as it did in Q3. Industrial production and retail sales will also simultaneously be released.

Rosy data would continue cooling fears about a slowdown in global growth and perhaps offer a boost to ASEAN currencies such as the SGD, IDR, PHP and MYR. That may offer a further lift to regional benchmark stock indexes such as the Nikkei 225. The Japanese Yen is thus looking more vulnerable and may continue weakening. Will the AUD/USD and NZD/USD be able to find some upside momentum?

USD/JPY Technical Analysis

USD/JPY continues to extend its uptrend from August after prices took out descending resistance from November 2018. Now the pair is facing the high from May 2019 at 110.67 which if taken out, exposes a potential falling trend line from late 2016/early 2017. Immediate support sits below at 109.92 which is the high from May 30.

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USD/JPY Daily Chart

Japanese Yen Prices Fall, USD/JPY Rally May Extend on China GDP

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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