Market update: USD/JPY could struggle to find acceptance below the 142.00 mark

USD/JPY fundamental backdrop

USD/JPY resumed its selloff today helped in part by a downward revision to US Q3 GDP. As we speak USD/JPY is testing the 142.00 support area, with a break below opening up the potential for further downside ahead of the year end.

The final Q3 GDP number was revised downward today which showed a slowdown in consumer spending. Other data from the US today also missed estimates with the Philadelphia Fed manufacturing survey revealed that business conditions worsened with a print of -10.5, well above the forecasted figure of -3. On a positive note, the job market remains resilient with initial jobless claims growing by 205k beating estimates of 215k.

Risk events ahead

The economic calendar is thinning out as the year end approaches, but we do have US PCE data tomorrow, which could have a massive impact on rate cut expectations. A significant drop-off may lead to market participants price in even more rate hikes than they already have, and this would thus push the USD index lower. Core PCE price index YoY is expected to come in at 3.3%.

Economic calendar

USD/JPY technical analysis

USD/JPY from a technical perspective is attempting to break below the 142.00 support area before eyeing the psychological 140.00 handle. Personally, I think downside will be limited, particularly following stickier Japanese inflation and recent comments from the BoJ. However, US PCE data tomorrow could assist in providing a catalyst for a move lower.

Alternatively, a push higher here faces its first significant area of resistance around the 144.00 mark before the psychological 145.00 level comes into focus.

Key levels to keep an eye on:

Support levels:

• 142.00
• 141.00
• 140.00

Resistance levels:

• 144.00
• 145.00
• 146.50

USD/JPY daily chart

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