Japanese yen slides after hot US release sales

The Japanese yen is sharply lower on Thursday. In the North American session, USD/JPY is trading at 149.02, up 1.1% on the day.

Japan’s economy bounces back in second quarter

Japan’s economy jumped 3.1% y/y in the second quarter, an impressive turnaround from the revised 2.3% decline in the first quarter and above the market estimate of 2.1%. This was the strongest yearly expansion since Q2 of 2023, driven by strong private consumption after a wage deal in the spring resulted in hefty wage gains.

The yen has looked razor sharp of late, gaining a massive 6.7% in July and strengthening to 141.68 last week, its best showing since January. The US dollar fought back today, boosted by a sizzling US retail sales report which drove USD/JPY up 1.1%.

Retail sales jumped 1% m/m in July, up sharply from a revised -0.2% and blowing past the market estimate of 0.3%. As well, unemployment claims surprised on the downside at 227 thousand, lower than the revised 237 thousand previously and below the market estimate of 235 thousand.

Today’s better-than-expected consumer spending and unemployment data supports a case for a modest 25-basis point cut from the Federal Reserve in September. Last week’s rout in the global markets raised expectations of a massive 50-basis point cut as a response to fears of a deterioration in the US economy. These fears have been allayed somewhat but if the US posts more soft data we could see another sharp decline in the financial markets.

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USD/JPY Technical

• USD/JPY pushed past resistance at 147.91 and 148.51 earlier. Next, there is resistance at 149.52
• 147.00 and 146.40 are providing support