- Japanese yen remains close to 150
- US GDP expected to accelerate to 4.5%
Dollar-yen is unchanged on Wednesday, trading at 149.91 in the North American session.
Will yen break past 150?
Like an acrobat on a tightrope, the yen has been hovering within a whisker of the 150 level. This has continued for almost two weeks, with investors keeping peeled eyes on the yen, waiting for it to breach the symbolic 150 line. It remains unclear if 150 is a ‘line in the sand’ for the Bank of Japan, which tends to remain mum about exchange levels in order to dissuade speculation on the currency.
The last time the yen broke above 150 was October 3rd, at which time the yen recovered and spiked lower. The BoJ refused to announce if it had intervened, although an examination of the BoJ data suggests that there was no currency intervention. The central bank has been jawboning about the yen being too low, and if the yen depreciates further, there is a real possibility of intervention.
Japan’s inflation has been above the 2% target for about a year and a half, but the BoJ is sticking to its script that inflation is not sustainable until wage growth increases. BoJ Core CPI, which is closely monitored by the central bank, edged up to 3.4% in October, up from 3.3% in September and above the market consensus of 3.3%. High inflation, rising global rates and a weak yen are putting pressure on BoJ policymakers to tighten policy.
US GDP expected to jump to 4.5%
The US releases third-quarter GDP on Thursday and the markets are expecting a very strong print. The consensus estimate of 4.5%, compared to 2.1% in the second quarter. This would mark the highest level since Q4 2021, when the economy was in recovery mode from the Covid pandemic.
As the major economies grapple with weak growth, US exceptionalism has been marked by a strong labour market that is driving consumer spending. The Fed is clearly worried, with Jerome Powell stating last week that continuing strong growth could complicate the efforts to rein in inflation and force the Fed to raise rates. As far as the Fed is concerned, a strong GDP release could be “too much of a good thing” which may force the Fed to raise rates in December.
USD/JPY Technical
- USD/JPY is testing support at 149.67. Next, there is support at 149.35
- There is resistance at 150.49 and 150.99
