USD/JPY forecast ahead of final Japan Q2 GDP data
- The USD/JPY pair was little changed after the latest Japan household spending data.
- The numbers showed that spending declined substantially in July.
- The pair will next react to the latest Japan GDP numbers.
The USD/JPY price was little changed in the morning session after the relatively weak Japan’s household spending numbers. The pair was trading at 109.80, which was in the same range it was in the past few sessions.
Japan household spending data
Consumer spending is the biggest part of most economies, including Japan. Therefore, traders tend to pay a close attention to a country’s household spending data.
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Earlier Tuesday, Japan published the relatively weak household spending numbers. The data revealed that the country’s household spending declined by 0.9% in July after it dropped by 3.2% in the previous month. This decline was lower than the median estimate of 1.1%. It was also the third straight month that spending has been on the negative side. The spending rose by 0.7% on a year-on-year basis.
Additional data revealed that the country’s overtime pay rose by 12.20% in July after rising by 18.0% in June. This is an important number that provides a gauge of the performance of a country’s corporate sector. Besides, extremely busy companies tend to have more demand for overtime workers. Further, average cash earnings rose by 1.0% in July.
The USD/JPY has also been reacting to the decision by Japan’s prime minister, Yoshihide Suga to quit in the coming months. His decision came at a time when the country’s Covid situation has deteriorated amid a slow rollout of vaccines. The country is recording tens of thousands of new cases every day.
Meanwhile, the pair is also wavering as the market reacts to the recent economic data from the United States. The numbers showed that the economy added just 235k jobs in August while the unemployment rate improved to 2.5%.
Looking ahead, the USD/JPY will react to the latest Japan’s GDP numbers scheduled for Wednesday. The data is expected to show that the economy expanded by 1.6% in the second quarter after rising by 1.3% in Q1.
The daily chart shows that the USD/JPY pair has been in a consolidation phase. It remains between the key support and resistance levels at 109.06 and 110.60. It is also along the 25-day and 50-day exponential moving averages (EMA).
The pair is also slightly above the 23.6% Fibonacci retracement level. Notably, it appears to be forming a head and shoulders pattern. Therefore, a bearish breakout cannot be ruled out.
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