What did the data show?
Traders paid attention to a batch of Japanese data today. The quarterly GDP rose by 0.3% in the second quarter, better than -0.9% in the first quarter. The annualized economic activity roared higher to 1.3%, up from -3.7% previously. However, the third quarter might be a bit different, considering the new measures to curb the spread of the virus in the country.
Additionally, Japanese industrial production also improved and printed 23% for June, followed by the 6.2% number for capacity utilization, way better than -6.8% scored in May. The Yen advanced after these numbers, and it has managed to hold gains throughout the day so far.
What about US and USD/JPY pair?
Later in the US session, the New York Empire State manufacturing index for August is seen dropping notably to 29 from 43 in May. On Friday, the University of Michigan’s consumer sentiment cratered to the lowest level in a decade. Respondents cited soaring inflation and rising house prices as their concerns. The USD dropped afterwards as it might lead to more dovishness by the Fed.
The USDJPY pair is often tightly correlated to US yields, and since US yields appear to have peaked in April/May, the uptrend in the USDJPY pair might be over for now too.
From the technical point of view, the initial support appears to be at 109.30, with the next level of demand near August lows at 108.75. Should the USDJPY pair drop below that support, the medium-term outlook could change to bearish. Alternatively, the resistance remains at the psychological level of 110, where both the 8 and 21-day EMAs are converged, reinforcing the selling pressure.