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• USD/JPY recovers its intraday losses pre-release of US economic data.
• Chinese GDP exceeded expectations; contributing support for the Japanese Yen.
• Higher US Treasury yields provide support to underpinning the US Dollar.

USD/JPY halts a two-day winning streak possibly on the back of upbeat Chinese economic data. The spot price trades lower near 149.80 during the European session on Wednesday. However, the USD/JPY is benefiting from the upbeat Retail Sales from the United States (US), buoyed by higher US Treasury yields.

Chinese Gross Domestic Product exceeded market consensus in the third quarter, reporting a growth of 1.3% compared to the anticipated 1.0%. The yearly based report for the same quarter revealed a 4.9% increase, surpassing the expected 4.4%.

Moreover, China's Retail Sales (YoY) rose by 5.5%, surpassing both the previous figure of 4.6% and the expected 4.9%.

Japanese Finance Minister Shunichi Suzuki declined to comment on currency intervention following remarks from an International Monetary Fund (IMF) official on Tuesday. Suzuki stated that there was no necessity to delve into the specific factors influencing the currency.

Media reported on Tuesday that the Bank of Japan was contemplating revising its core Consumer Price Index (CPI) forecast for the fiscal years 2023 and 2024 while maintaining its inflation forecast for 2025.

The dovish outlook, combined with generally optimistic risk sentiment, may persist in weakening the safe-haven Japanese Yen (JPY), indicating a higher likelihood of an upward trend for the USD/JPY pair.

Investors might observe interventions by Japanese authorities in the foreign exchange market aimed at strengthening their currency, which could exert downward pressure on the USD/JPY pair.

US Retail Sales in the US exceeded expectations, rising to 0.7% in September instead of the expected 0.3%. The Retail Sales Control Group also saw a significant increase of 0.6%, up from the previous 0.2%. Meanwhile, US Industrial Production improved by 0.3%, defying expectations of stagnation at 0.0%.

The positive Chinese data could exert minor pressure on the US Dollar Index (DXY) struggled to maintain intraday gains, hovering around 106.20. On a positive note, US Treasury yields improved, reaching 4.85% for the 10-year US Treasury bond, potentially giving support to the Greenback.

Market watchers are likely keen on understanding the Federal Reserve's monetary policy trajectory, especially after dovish remarks from officials. Richmond Fed President Thomas Barkin suggested that the current policy is already restrictive, expressing uncertainty about the upcoming FOMC meeting in November. Furthermore, Minneapolis Federal Reserve Bank President Neel Kashkari emphasized that inflation has persisted longer than expected, aligning with the dovish stance of several other Fed officials.

Investor attention is expected to focus on US housing data and Fed officials' speeches on Wednesday. Additionally, Japanese inflation data on Friday, the National Consumer Price Index (CPI) ex-Fresh Food for September, is anticipated to show a year-on-year increase of 2.7%, down from the previous reading of 3.1%.
 

USD/JPY: Additional Important Levels

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