USD/JPY juggles around 132.70 ahead of Japan’s GDP, US inflation in focus

  • USD/JPY auctions off as investors await Japan’s GDP figures.
  • A moderate performance is expected from Japan’s GDP.
  • This week, the investing community is focused on US inflation as it will dictate the Fed’s likely action.

USD/JPY is hovering in a narrow range of 132.33-133.01 as investors await the release of Gross Domestic Product (GDP) figures from Japan’s Cabinet Office in the Asian session. The asset has remained stronger over the past two weeks of trading after detecting a bounce near the round level support of 127.00.

Uncertainty surrounding the release of Japanese GDP sidelined market participants. A preliminary estimate of quarterly GDP is -0.3% compared to the previous print of -0.2%. While annualized GDP is expected to remain unchanged at -1%. A higher than expected GDP figure will strengthen Japanese bulls.

Meanwhile, the US Dollar Index (DXY) is expected to register further declines amid improving investor risk appetite. A turn in positive market sentiment supported risk-sensitive currencies and ultimately diminished the appeal of the DXY.

This week, the major event is the US Consumer Price Index (CPI), which will be released on Friday. The annual US CPI figure is estimated at 8.3%, similar to its previous print, while core CPI could be reduced to 5.9%. The deadly duo of bullish US Nonfarm Payrolls (NFP) and elevated inflationary pressures bolster the odds of an extreme hawkish stance from the Federal Reserve (Fed) in its monetary policy announcement next week. It should be noted that the US economy reported the US NFP at 390k, well above the forecast of 325k.