The USD/JPY currency pair experienced a notable increase of 0.27%, trading near the 153.70 mark during the European session on Wednesday. This upward movement is primarily attributed to the underperformance of the Japanese Yen (JPY) against its major counterparts, driven by rising expectations surrounding a significant spending initiative in Japan’s fiscal budget. Analyst anticipations are centered on Prime Minister Sanae Takaichi potentially announcing these plans aimed at invigorating economic growth.
The speculation regarding large-scale government spending has gained traction due to disappointing economic data released earlier this week. Japan’s Gross Domestic Product (GDP) for the fourth quarter showed only a 0.1% growth, falling short of the initial expectation of 0.4%. Despite this, it is worth noting that Japan’s economy has bounced back into positive territory after a contraction of 0.7% in the previous quarter.
The immediate future for the Japanese Yen will likely pivot on the National Consumer Price Index (CPI) data, set to be released on Friday. Analysts anticipate that the national CPI, excluding fresh food, will show an annual increase of 2%, a decline from the 2.4% growth recorded in December. This upcoming data could have significant ramifications for the JPY, especially in the context of inflation and monetary policy.
On the other hand, the US Dollar (USD) is trading slightly higher as market participants await the release of the Federal Open Market Committee (FOMC) minutes from the January policy meeting, scheduled for 19:00 GMT.
From a technical standpoint, the USD/JPY pair has reached 153.57 during the European trading hours. However, it remains below the 20-day Exponential Moving Average (EMA) at 154.73, indicating a potential bearish bias. The EMA is now positioned as immediate resistance. The 14-day Relative Strength Index (RSI) sits at 41.35, reflecting a bearish outlook and suggesting waning upward momentum.
A daily closing price above the 20-day EMA at 154.73 could ease downward pressure and trigger a corrective rally toward the February 9 high of 157.66. Conversely, should the price drop below the January 27 low of 152.00, it may pave the way for a further decline towards the key psychological level of 150.00.
The latest GDP data—released by Japan’s Cabinet Office—provides crucial context for interpreting the current economic landscape. The quarterly GDP report, which measures the total economic output, is a key indicator of Japan’s economic health. Generally, higher GDP growth figures are favorable for the JPY, while lower readings can dampen its appeal in global markets.
In summary, with key economic indicators and potential government spending plans in play, both the USD and JPY are poised for significant movements in the coming sessions. Market participants will be closely monitoring upcoming data releases for insights into central bank policy directions and currency valuations.
