The pair keeps trading in a range; the US Dollar extends its last week’s decline
On Friday, USDJPY closed the day in the red zone near the 106.55 area and started the new trading week just a few pips higher. Recent Japan’s economic reports, which turned out to be a total disaster, weakened the yen and helped the pair to recover some gains. However, the fragile USD prevented the major’s rally.
Japan’s GDP q/q for the second quarter showed a contraction of -7.8% versus a quite low expectation of -7.5%. However, the annualized GDP numbers were more worrying as the indicator shrank -27.8% q/q versus -26.9% expected, which became the third consecutive fall in a row. Moreover, private consumption decreased at the fastest pace since 1980.
The industrial production also disappointed as both m/m and y/y indicators were revised lower to +1.9% and -18.2% respectively. After the GDP’s release Japan’s Economy Minister, Yasutoshi Nishimura had a speech and indicated that the Japanese economy was in a severe state, however, the contraction was smaller than in the US, Europe, and China. He also promised to watch the pandemic and respond as needed as well as to back employment and private consumption. Markets considered his comments as positive, especially after such messy statistics that may underpin yen versus its USD counterpart.
Meanwhile, the American dollar continues to keep its bearish tone intact amid the fall in the US yields, stalemate in the US Congress, and possible improvement of the relations between China and the US. While Beijing increased the US crude oil imports, the US President Donald Trump extended the previous deadline to offload TikTok app from 45 to 90 days. The news seemed inspiring and brought some risk-on detriment of the safe-haven greenback.
Now USDJPY sticks to its rangebound theme between 106.45-65. Monday’s economic calendar is empty so the markets will likely wait for tomorrow’s Japanese import/export figures, however, the US-China relations and global COVID-19 situation remain more relevant factors to determine the traders’ mood. The resistance is pegged at 107.00, 107.20-35, 107.50 while the support is seen at 106.45, 105.95, 105.70.