USD/JPY sits at six-week lows near 106.50 ahead of US GDP, FOMC
- USD/JPY continues to match dollar’s footstep amid better market mood.
- US advance Q1 GDP to show the sharpest contraction since 2009.
- The spot challenges daily S1 at 106.51, further falls likely?
Having reached the lowest levels in six weeks at 106.51 in Asia, USD/JPY has entered a phase of downside consolidation, as a sense of calm prevails ahead of the key event risks due later in the NA session. At the time, of writing, the spot loses 0.29% to trade at 106.55.
The spot continues to follow the broad-based US dollar trend so far this week, with the latest halt in the dollar decline offering some support. The US dollar index trades at 99.70 after hitting a daily low of 99.63.
The haven demand for the greenback continues to suffer amid a better market mood on hopes re-opening of the economies in Australia, New Zealand and parts of Europe. Further, the dismal US CB Consumer Confidence data combined with the expectations of a sharp US economic contraction weigh on the sentiment around the buck.
On the JPY-side of the story, the JPY bears fail to benefit from the uncertainty over the virus impact on the Japanese economy despite the Bank of Japan’s (BOJ) additional easing measures. Meanwhile, the latest comments from the BOJ Chief Kuroda were also ignored.
In the day ahead, the pair could likely rebound on poor US growth figures, as the weak data is already priced-in by markets. However, the main driver will likely remain the FOMC decision.
Technically, USD/JPY is flirting with the daily S1 at 106.51. A failure to resist the last would open floors for a test of the 106-round figure. Alternatively, any bounce will face stiff resistance at the daily pivot point of 106.93, above which the 5-DMA barrier at 107.15 will be tested.
USD/JPY additional technical levels to consider