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Dollar Bounces on Better GDP Data
Following a heavy sell off again this week, USDJPY has bounced a little off Thursday’s lows and is trading in the green again today ahead of the latest US core PCE data due today. As the Fed’s preferred gauge of inflation, the data holds the power to be highly market moving. Given that this is the last key reading we’ll see before next week’s policy meeting, any surprise reading today could fuel volatility ahead of the weekend. Yesterday, the preliminary Q2 US GDP estimate came in above expectations at 2.8%, vs 2% expected, up sharply from 1.4% in the prior reading. While market pricing for an expected rate cut is little changed, any surprise upside in today’s data might muddy the outlook somewhat.
Core PCE in Focus
On the numbers front, the market is looking for core PCE to rise to 0.2% MoM, up from 0.1% prior. If confirmed, the data should see the current USD support remain into next week though buying is unlikely to intensify. However, an upside surprise could drive a strong recovery bounce. If the data comes in below forecasts, however, this will be firmly bearish for USD ahead of the FOMC next week. With the BOJ expected to announce fresh tightening next week, including the risk of double action (rate hike and QT), USDJPY looks vulnerable to further downside over the next week if today’s data is weak.
Technical Views
USDJPY
The sell off in USDJPY has seen the market breaking below the bull channel from last YTD lows and below the 154.70 level. Price is now testing support at the 152 level and with momentum studies bearish, risks of a further break towards 146.81 are seen in coming weeks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.