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How have the Fed odds shifted after yesterday’s CPI data?How have the Fed odds shifted after yesterday's CPI data?
Key Insights
  • Japan’s Q3 GDP contracts 0.5%, far exceeding a 0.1% forecast.
  • Sharp annual economic reversal from 4.5% growth to a 2.1% shrinkage.
  • USDJPY may decline as Japan’s economic woes support yen.
  • AUDUSD, NZDUSD poised for gains on a softer dollar.
  • USDJPY’s support at 150 pivotal for future price direction.

Quick Fundamental Outlook

The Japanese economy saw an unexpected contraction of 0.5% in the third quarter, significantly more than the forecasted 0.1% decline. This marks a stark deceleration from the 1.1% growth in the previous quarter and represents the first contraction in three quarters, signifying a potential slowdown in consumption-driven growth. Year-on-year, the economy shrank by 2.1%, contrasting sharply with the 4.5% growth seen previously.

This economic contraction, alongside a softer U.S. inflation reading, suggests the end of the Fed’s aggressive rate hikes, affecting major currency pairs. The USDJPY may face downward pressure as the yen finds support from Japan’s economic contraction.

The AUDUSD and NZDUSD could see an uptick as a softer dollar improves risk appetite, potentially leading to a rally in these commodity-linked currencies. This shift in economic indicators and market sentiment could reshape the currency forecasts, with potential for increased volatility in the trading of these pairs.

USD/JPY Prices Forecast

In today’s forex landscape, the USD/JPY pair is a focal point for investors, maintaining composure around the 150.59 mark, with a subtle 24-hour shift. Key technical levels are in play, with a pivot point situated at approximately 150.60, while immediate resistance looms at 152.86.

Should bullish momentum persist, resistance thresholds at 152.36 and further at 152.86 will be the areas to watch. Conversely, support forms at lower echelons near 149.65 and 148.81, providing a cushion should bearish pressure intensify.

The Relative Strength Index (RSI) at 57.01 underscores a market in equilibrium, leaning slightly towards bullish sentiment without breaching overbought territory.

As the market anticipates the next move, the overarching sentiment remains cautiously optimistic, with a close eye on the resilient 150 support level, which is expected to be a determining factor for the USD/JPY’s trajectory in the near term.

The Australian Dollar, a proxy for risk sentiment in currency markets, is currently trading with a mild bullish bias at $0.64985, showing a slight uptick of 0.11%. As the currency hovers near significant technical levels, investors are weighing every price action carefully.

The AUD/USD pair is encountering a dynamic landscape with the 50-day Exponential Moving Average (EMA) at $0.64104 providing a foundational support level. The RSI, at a neutral 52.02, leaves room for potential upside movement, while the MACD, hovering around the signal line, suggests a market in balance, waiting for a catalyst to determine its next move.

Currently, the 0.6520 level is under the spotlight, poised to act as a robust resistance point. A decisive close above this threshold could ignite a bullish narrative, leading the pair to higher grounds.

Conversely, remaining subdued under this level might reinforce a bearish outlook, with potential dips towards the lower support zones at 0.6395 and 0.6317.

NZD/USD Prices Forecast

The New Zealand Dollar (NZD/USD), colloquially known as the “Kiwi,” is currently experiencing modest gains against the U.S. Dollar, trading at $0.60153 with a slight uptick of 0.15%. This minor rally follows a period of consolidation, as indicated by its recent trajectory on the charts.

Technically, NZD/USD seems to be finding support at the EMA 50 level of $0.59152, suggesting that the medium-term momentum may be tilting towards the upside. The RSI at 50.97 supports this view, as it stands near the midpoint, indicating a balance between buying and selling pressures.

Key resistance and support levels are shaping the currency pair’s potential pathways. The immediate resistance is observed at $0.60528, followed by a stronger ceiling at $0.61490, which traders will monitor closely. Support levels are identified at $0.59491 and $0.58559, providing potential floors for any retracement.

For a look at all of today’s economic events, check out our economic calendar.

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