Japanese Yen continues losing streak following Q3 GDP data – FXStreet

• The yen continues to weaken due to the stagnation of domestic economic activity.
• Japan's GDP growth rate in the third quarter was 0.9% annually, slowing from the 2.2% growth recorded in the second quarter.
• Japan's Kato said he would take appropriate action to address excessive fluctuations in exchange rates.

The Japanese yen (JPY) extended its losing streak against the US dollar (USD) to a fifth consecutive session following the release of Japan's third-quarter gross domestic product (GDP) data on Friday. The upside potential for the USD/JPY pair is supported by the strength of the US dollar (USD). Traders are also preparing for the release of U.S. October retail sales data, expected later on Friday.

Japan's preliminary gross domestic product (GDP) for the third quarter increased by 0.2% from the previous quarter, slowing down from the 0.5% increase in the previous quarter and in line with market expectations. The country's GDP grew at an annual rate of 0.9% in the third quarter, above the market consensus of 0.7%, but marked a significant slowdown from the 2.2% growth recorded in the second quarter.

Japan's Finance Minister Katsunobu Kato said on Friday that the country will respond appropriately to excessive fluctuations in foreign exchange (FX) rates. Mr. Kato emphasized the importance of stable exchange rate movements that reflect economic fundamentals, and expressed concern about unilateral and rapid market fluctuations.

Meanwhile, Japan's Minister of Economy, Trade and Industry Yoshinari Akazawa said he expects the economy to continue to recover at a moderate pace, supported by improvements in employment and wages. However, Mr. Akazawa also emphasized the need to carefully monitor potential downside risks from fluctuations in the global economy and financial and capital markets.

The Japanese yen remains under pressure as the US dollar hovers near year-to-date highs.

• The US dollar index (DXY), which measures the US dollar's performance against six major currencies, hovered around 107.06, its highest since November 2023.
• On Thursday, Federal Reserve Chairman Jerome Powell said the U.S. economy has performed “remarkably well” recently and the Fed has room to lower interest rates gradually. Meanwhile, Richmond Fed President Thomas Barkin said that while the Fed has made strong progress so far, there is still work to do to maintain momentum.
• The U.S. producer price index (PPI) rose 2.4% year-on-year in October, up from the revised 1.9% increase in September (previously 1.8% increase), and exceeded market expectations for a 2.3% increase. Meanwhile, core PPI, which excludes food and energy, rose 3.1% year-on-year, slightly higher than the 3.0% expected.
• Bank of Japan Deputy Governor Shinichi Uchida on Thursday emphasized the need for financial institutions and authorities to prepare for a sudden outflow of deposits due to advances in digitalization and technology. Mr. Uchida also pointed out that the relationship between non-bank financial institutions and the banking sector is strengthening, and deterioration in the non-bank sector could spread through market channels to the entire financial system.
• Japan's producer price index (PPI) rose 3.4% year-on-year in October, beating expectations of 3.0% and the previous reading of 3.1%. Meanwhile, PPI rose 0.2% from the previous month, exceeding the expected flat growth for the same month.
• A summary of opinions released by the Bank of Japan at its October meeting highlighted the gap in opinion among policymakers regarding further interest rate hikes. Nevertheless, the central bank maintained its outlook and signaled that it could raise the base rate to 1% by the second half of 2025, potentially resulting in a total policy tightening of 75 basis points from current rates. suggested that there is.
• As expected, the US Consumer Price Index (CPI) rose 2.6% year-on-year in October. Meanwhile, core CPI, which excludes the more volatile food and energy components, rose 3.3%, in line with market expectations.

Technical analysis: Bullish bias prevails, USD/JPY rises to around 156.50

USD/JPY was trading around 156.50 on Friday. Daily chart analysis shows an uptrend within an ascending channel pattern, indicating a continued bullish bias. The 14-day Relative Strength Index (RSI) is just below the 70 level, supporting the bullish outlook. A breakout above the 70 mark indicates an overbought condition and could lead to a downward correction in the pair.

The USD/JPY pair may target the upper end of the ascending channel around the 159.70 level. A break above this level would strengthen the bullish mood and could push the stock towards the four-month high of 161.69 hit on July 11.

On the downside, the USD/JPY pair could find support at the 9-day exponential moving average (EMA) near 154.65, followed by the lower bound of the ascending channel at 153.90.

USD/JPY: Daily chart