USD/JPY plunges amid US jobless claims rising, Japan’s surprising GDP surge

• US Initial Jobless Claims tops estimates, toppling USD/JPY; UST yields tumble.
• Japan’s economy outperforms with 2.7% GDP; technical recession avoided.
• Investors eye June 13 US inflation figures, Fed meeting amid USD dynamics.

USD/JPY dropped close to 0.70% on Thursday after a jobs report portraying the labor market is easing in the United States (US), which justifies the US Federal Reserve (Fed) skip stance for June’s monetary policy meeting. After hitting a daily high of 140.22, the USD/JPY is trading at 139.13 at the time of writing.

Yen rises as Wall Street bounces, US Dollar fumbles amid labor market easing

Wall Street trades with gains while tumbling US Treasury bond yields, bolstering the Japanese Yen (JPY), which found renewed life and is appreciating against most G8 FX currencies. The US Bureau of Labor Statistics (BLS) stated that unemployment claims for the last week rose above estimates of 232K and reached 261K, its highest level since October 2021. The same data revealed that Continuing Claims fell by 37K to 1.757 M during the week ending May 27.

The USD/JPY dropped after the release, following the direction of the US 10-year Treasury bond yield, which dropped six and a half basis points (bps) as traders began to price in the first Fed pause after the data. At the same time, the US Dollar Index (DXY), which measures the buck’s performance against a basket of currencies, drops 0.60%, at 103.395, below its 20-day Exponential Moving Average (EMA).

On the Japanese front, its economy grew above than initially thought in the first quarter, with GDP coming at 2.7% YoY, vs. forecasts of 1.9%, showing the Japanese economy is developing more resilient than its global counterparts. Notably, data revised out a technical recession as 2022 Q4 was upward revised to 0.4% QoQ. It should be said that growth was driven by inventories, a sign that demand is decelerating.

Upcoming events

The US economic agenda would reveal the latest inflation figures on June 13, when the Federal Reserve begins its two-day meeting to set monetary policy, while a light economic calendar on the Japanese side would lean USD/JPY traders depending on US Dollar dynamics.

USD/JPY Price Analysis: Technical outlook

USD/JPY consolidates at around the 139.00-140.40 range for the fourth straight day, unable to break above/below the range, though remaining upward biased as shown by the daily moving averages (MAs) staying below the exchange rate. The pullback is about to test the 20-day EMA at 138.64, which, if broken, would extend the pair slide towards May 2 high-turned support at 137.77. For a bullish continuation, the USD/JPY must surpass the 140.00 mark and challenge the weekly high of 140.45.