USD/JPY advances as US PPI, Japan retail sales and GDP lead the way

• The USD/JPY pair reached the 150.99 area, with an advance of 0.30%.
• The Dollar managed to gain momentum despite the weak PPI numbers thanks to positive retail sales.
• The BOJ’s dovish bets following weak third-quarter GDP figures pushed the pair higher.

The USD/JPY pair managed to gain momentum in the Wednesday session and advanced to 150.90, with a gain of 0.30%. The pair rose mainly driven by strong US retail sales figures and Japan’s poor third-quarter Gross Domestic Product (GDP) figures, which fueled dovish bets on the Bank of Japan (BoJ).

In October, the US Producer Price Index (PPI) rose 1.3%, below the 1.9% forecast. In addition, a monthly decrease of 0.5% was observed, which contrasts with the expected growth of 0.1%. On the other hand, retail sales saw a marginal decline of 0.1%, better than the 0.3% contraction expected. On a year-over-year basis, sales rose 2.5%, highlighting a slower growth rate than September’s 4.1% increase. In reaction, the US dollar found some demand as markets appear to be concerned that the strong data could cause Federal Reserve (Fed) officials to consider further tightening, as US Treasuries rose following the data. Still, after the report of cooling inflation and job creation figures, it is most likely that the Federal Reserve (Fed) will not raise rates at the next meeting in December.

On the Yen side, Japanese Q3 GDP fell -0.5% QoQ, below expectations of -0.1%, and corresponding Q2 growth of 1.2% posted its weakest reading since Q1 2022 In reaction, the Japanese Government Bond Yield (JGB) fell sharply, and it is anticipated that the BoJ will not rush to raise rates due to the weakening economy. In line with this, the World Interest Rate Probabilities (WIRP) tool indicates a delay in rate hike expectations until June.

USD/JPY levels to watch

On the daily chart, USD/JPY is showing a neutral to bullish technical bias, with positive signals suggesting that the bears are losing momentum. In bullish territory, the Relative Strength Index (RSI) maintains a positive slope above its midline, while the Moving Average Convergence (MACD) displays stagnant red bars. Zooming in, the pair is above the 20,100,200-day SMA, suggesting that the bulls are in control on a longer time horizon as well.

Supports: 150.30 (20-day SMA), 150.00, 149.00.
Resistances: 151.00, 151.50, 153.00.

USD/JPY daily chart