USD/JPY gain as US PPI, Retail Sales and Japan’s Q3 GDP set the pace

• The USD/JPY surged to 150.99, seeing 0.30% gains.
• The USD managed to gain momentum despite soft PPI figures on the back of positive Retail Sales.
• Dovish bets on the BoJ after weak GDP figures from Q3 pushed the pair upwards. 

The USD/JPY found some lift on Wednesday's session and advanced to 150.90, seeing 0.30% gains. The pair ascended mainly driven by strong Retail Sales figures from the US and poor Q3 Gross Domestic Product (GDP) figures from Japan, which fueled dovish bets on the Bank of Japan (BoJ).

In October, the US Producer Price Index (PPI) recorded a 1.3% increase, falling short of the expected 1.9% rise. Additionally, a monthly decline of 0.5% was observed, contrasting the projected 0.1% growth. On the other hand, Retail Sales experienced a marginal decrease of 0.1%, better than the anticipated 0.3% contraction. Year-on-year, sales rose by 2.5%, highlighting a slower growth rate than September's 4.1% increase. As a reaction, the US Dollar found some demand as markets seem to worry that strong data may make Federal Reserve (Fed) officials consider further tightening as US Treasuries rose after the data. Still, after the report of cooling inflation and job creation figures, the strongest case is that the Federal Reserve (Fed) won’t hike in the next December meeting.

On the JPY’s side, Japan's Q3 GDP fell by -0.5% QoQ, below expectations of -0.1% and the corresponding 1.2% growth in Q2 recorded its weak reading since Q1 2022. As a reaction, the Japanese Government Bond Yields (JGB) sharply declined, and they are anticipating that the BoJ won’t rush to hike rates due to the weakening economy. In line with that, the World Interest Rate Probabilities tool (WIRP) indicates a delay in liftoff expectations until June.

USD/JPY levels to watch

Based on the daily chart, the USD/JPY displays a neutral to bullish technical bias, with positive signals suggesting that the bears are losing momentum. In the bullish territory, the Relative Strength Index (RSI) maintains a positive slope above its midline, while the Moving Average Convergence (MACD) presents stagnant red bars. Zooming out, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that the bulls are also in control on the broader time horizon.

Supports: 150.30 (20-day SMA), 150.00, 149.00.
Resistances: 151.00, 151.50, 153.00.

USD/JPY daily chart