USD/JPY rises to fresh monthly highs after strong US data

• USD/JPY rose to a high of around 150.77, it highest level since late October 2022.
• US Q3 GDP preliminary estimates beat expectations, as well as Durable Goods orders from September.
• Jobless Claims from the third week of September came a tick higher than the expectations.
• The USD holds its foot despite lower US yields and dovish bets on the Fed. 

In Thursday's session, the USD/JPY continued gaining ground, rising to a high of around 150.77 and then settling at 150.35. The US Dollar is trading strong against its rivals, with the DXY index rising to monthly highs and keeping its momentum despite the US Treasury yields retreating. Despite robust economic activity data, markets continue to bet on higher odds of the Federal Reserve not hiking again in 2023.

On the data front, the Gross Domestic Product (GDP) preliminary estimate from Q3 grew at an annualised rate of 4.9%, higher than the expected 4.3% and increased in relation to its last reading of 2.1%. In addition, Durable Goods Orders from September rose by 4.7% MoM in September, way higher than the 1.5% expected. On the negative front, Jobless Claims from the week ending on October 21 came in at 210,000, above the expected 208,000 and increased in relation to its last reading of 200,000.

Meanwhile, the US bond yields are falling. The 2-year rate declined to 5.05% while the longer-term 5 and 10-year rates fell towards 4.84% and 4.90%, limiting the USD upward trajectory. In line with that, according to the CME FedWatch Tool, the odds of a 25 basis points hike in December declined to 20%, and it also suggests that a pause in November is nearly priced in. As long as investors refrain from placing bets on one more hike by the Fed, the upward momentum of the USD/JPY will be limited and as the speculation of a policy tweak of the Bank of Japan (BoJ) accompanied by rising Japanese Government yields, the pair could face some downwards pressure. 

Focus now shifts to Friday's Consumption Expenditures (PCE) figures from the US from September, whose outcome could affect the expectations on the next Fed's decisions.

USD/JPY Levels to watch 

 The USD/JPY daily chart signals a bullish sentiment for the short term. The Relative Strength Index (RSI) is favourably positioned in positive territory above its midline, reflecting an upward movement. Similarly, Moving Average Convergence Divergence (MACD) depicts green bars, affirming the bullish momentum. Additionally, the pair is above the 20,100,200-day Simple Moving Average (SMAs), indicating that the buyers are commanding the broader perspective.

 Support levels: 150.00, 149.50, 148.00.

 Resistance levels: 150.50, 150.70, 151.00

 USD/JPY Daily Chart