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Talking Points:

  • Japanese Yen held its ground as worse-than-expected GDP data was released
  • The anti-risk currency was more interested in what the Nikkei 225 did at open
  • Positive RSI divergence has emerged on a USD/JPY daily chart, will it reverse?

Find out what retail traders' Yen positioning hints about the price trend!

The Japanese Yen held its ground against its major counterparts as worse-than-expected GDP figures crossed the wires. The fourth quarter preliminary reading showed that Japan’s economy grew 0.1% q/q versus 0.2% expected. This was not as fast as the +0.6% increase in the third quarter. Annualized output was up 0.5% versus 1.0% expected. This was also slower than the +2.2% gain in the prior period.

So why the relatively mute reaction? The Bank of Japan is unlikely to change course on monetary policy any time soon. They are committed to boosting inflation and bring it to their target. In fact, just yesterday Governor Haruhiko Kuroda was reappointed and the status quo seems likely to continue.

With that in mind, the anti-risk currency was more interested in what the Tokyo Stock Exchange had in store just ten minutes later. The Nikkei 225 and Topix indexes rose at market open following yesterday’s selloff and the Japanese Yen didn’t take the beginning of Wednesday’s session too kindly.

Looking ahead, the US CPI release poses as high event risk for the Japanese currency. As Senior Currency Strategist Ilya Spivak mentioned, a jump in wages might trigger another bout of violet selling across stock exchanges.

USD/JPY Technical Analysis: Positive RSI Divergence

Japanese Yen Holds Ground on Soft GDP, Falls at Tokyo Open

On a daily chart, USD/JPY has been falling since the beginning of January when the pair was unable to push above a falling trend line from June 2015. Since then, the pair has been approaching the September 8th low at 107.31 and has closed on Tuesday at its lowest level since November 2016.

Positive RSI divergence has emerged hinting that downside momentum might be ebbing. Should the pair turn higher, the 76.4% Fibonacci retracement at 109.06 stands in way as immediate resistance. A break above that will expose the 61.8% level at 110.15.

Japanese Yen Holds Ground on Soft GDP, Falls at Tokyo Open