The US dollar lost its ground against the Japanese yen before the release of Japan’s household spending data and as U.S. yields kept on dropping. Sets of US economic data are set to be released this week as well, which can be a make or break on the Fed rate outlook. With the downward pressure on the greenback, will the lost extend or will it be only marginal in the near term?
At the time of writing, USD/JPY lost 1.04 percent to $112.05, compared to the Friday’s close of 113.226. The pair opened lowly at 112.034 with a session high of 112.141 and a session low of 111.0211. Also, USD/JPY failed to trade above its 20-day SMA of 112.530 and 50-day SMA of 112.590.
USD/JPY Time Frame : H1
USD/JPY Time Frame : Daily
Apparently, USD/JPY moved away from the 113.000 level and started to settle at 112.000 level. This is clear indication of a downward momentum in the following sessions. The pair found support at 111.811 but due to a fall through the new support stood at 111.358. The resistance is still at 112.313 at 09:51 UTC, but a break through later may result in a new resistance at 112.584. (Related articles here- FSM News: What Keeps USD/JPY Steady? / Yen Rallies Ahead of Weaker Dollar)
Relative to the weakness of the greenback, the US yields were a major loser in the morning session. The US 10Y Yield declined 1.52 percent to 2.2334 while the US 30Y dropped 0.74 percent to end at 2.996. Extending the list, US 2Y yield went down 1.77 percent and the US 5Y yield plunged 1.97 percent to 1.811. It turned out, the US dollar lost support from the Treasuries after the Thanksgiving.
Elsewhere, the market players look forward to the release of Japan’s data on household spending. The report will indicate the path of the economy in terms of consumer spending. In general, the consumer spending coincides with the strength of a nation’s economy as higher consumer confidence would mean higher ability of the consumers to spend and to save. Currently, the economy of Japan unexpectedly poses strong growth as the majority of the economic data in the third quarter showed palpable jump.
However, the household spending plunged in the September quarter amid the optimistic outlook in the economy. After the 4.6 percent decline in August, a 2.1 percent drop on an annual basis, which marked the seventh-straight month drop. On a positive note, the household expenditure advanced 2.8 percent on a monthly basis, surpassing the analysts’ expectation of a 0.6 percent gain. The Ministry of Internal Affairs and Communication is scheduled to deliver the report on Tuesday. (See FSM News : Declining Yen Could Help BOJ)
Meanwhile, sets of significant US economic data will be released as well before the week ends. The market analysts await for the revised US data on third quarter GDP together with the consumer confidence report. On Wednesday, the U.S. will the current figures for the ADP non-farm payrolls data for November and it will be followed by the report on Chicago’s Purchasing Market Index. The pending home sales, initial jobless claims and ISM’s manufacturing PMI report are scheduled this week as well.
The US economic data are expected to provide support on the Fed rate hike this December. The US central bank has confirmed a great probability of monetary policy adjustments in its latest minutes. Adding to this, New York Fed President William Dudely is scheduled to deliver a speech at an event in Puerto Rico. Mr. Dudely will likely drop more hints on the next move of the Fed.
The rate decision will be a make or break momentum for the US currency, a rate increase may result in appreciating dollar while an unchanged or lower rate could push the dollar on the defensive ground. Nonetheless, the December rate hike will highly feasible given that the market has learned to adjust since Trump won and as the US economy shows slow pace of growth.
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