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USD/JPY ignores downbeat preliminary figures of Japan Q4 GDP

  • USD/JPY remains on the back foot despite disappointing Japan GDP data.
  • Chinese efforts to counter coronavirus seem to trigger the risk reset.
  • Coronavirus/Brexit updates could entertain traders on the US President’s Day Holiday.

USD/JPY declines to 109.80 following the release of Japan’s preliminary fourth quarter (Q4) GDP data as Tokyo opens for Monday trading. The market players seem to emphasize more on the qualitative catalysts than the data as far as the Japanese yen is concerned.

Is GDP a signal to the BOJ?

As per the preliminary forecasts, Japan’s economy contracted well below 0.9% figure to 1.6% while the annual figures also disappoint with -6.3% versus -3.7% expected.

Read: Japanese GDP SA (QoQ) Q4 P -1.6% (est -1.0%; prevR 0.1%; prev 0.4%)

The first economic contraction after the four consecutive quarters of growth pushes the Bank of Japan (BOJ) policymakers to look towards further measures to safeguard the economy. While the recent statistics concerning spending and activity numbers have been soft, the diplomats should not ignore the International Monetary Fund’s (IMF) suggestion related to the future moves.

Risk catalysts keep the Yen strong…

Despite the BOJ’s efforts to weaken the JPY, the safe-haven benefits from the market’s broad risk aversion. China’s coronavirus and Brexit are among the main catalysts exerting downside pressure on the pair.

Chinese officials have tried from all the corners to tame the coronavirus fears and have registered an intermediate pullback in risk-tone. However, neither the broad sentiment nor the numbers have changed, which in turn keeps the USD/JPY pair on the back foot.

While portraying the same, the US S&P 500 Futures show a +0.24% mark to 3,389 by the press time.

As per the latest numbers from the epicenter Hubei, 1,933 new cases and 100 new deaths were registered on February 16. With this, the Hubei Health Commission said the total number of cases in the province had reached 58,182 by the end of Sunday, with 1,696 deaths.

Elsewhere, the UK and the EU are at the loggerheads on various issues and the latest updates suggest a tough start to the Brexit talks, up for early-March negotiations.

Looking forward, the US markets are closed for the President’s Day Holiday and hence fewer moves are expected to take place during the rest of the day. However, this doesn’t negate the possibilities of coronavirus/Brexit headlines to shake the quotes.

Technical Analysis

Friday’s Doji formation on the daily chart favors the pair’s another upside attempt towards 110.15 and 110.30 resistances that hold the keys to May 2019 top surrounding 110.70. Alternatively, 109.50/40 area comprising 50-day and 21-day SMAs could limit the pair’s short-term downside.


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