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USD/JPY falls to 133.00 on GDP worries and lackluster yields
USD/JPY accepts offers to reestablish intraday low, falling for the second day in a row. Yields continue under pressure for the third consecutive day due to fears of a recession and Fed ambiguity regarding its next move. As the United States, South Korea, and Japan conducted coordinated military maneuvers near the coast of Hawaii, geopolitical concerns may have boosted prices. Second-tier US data and risk catalysts are essential for new momentum.
During Tuesday's opening Tokyo session, the USD/JPY retests a session low near 133.00. During a lackluster session, the yen pair reflects declining US Treasury yields and recession concerns.
Despite the recent comeback, the USD/JPY exchange rate remains poor for the second day in a row due to concerns about the economic circumstances in China and the United States. The cautious outlook ahead of this week's Federal Open Market Committee (FOMC) meeting minutes further weighs on the yen pair.
China's Retail Sales slowed to 2.7% YoY in July, compared to 5.0% predicted and 3.1% previously, while Industrial Production (IP) decreased to 3.8% in the same month, compared to 3.8% previously and 4.0% market expectations. In addition, the People's Bank of China (PBOC) startled the markets on Monday by slashing medium-term lending facility (MLF) rates by 10 basis points (bps) in an effort to repel bearish.
In contrast, the US NY Empire State Manufacturing Index for August decreased to 31.3 from 11.1 in July and market expectations of 8.5. In addition, the August NAHB homebuilder confidence index in the United States dropped to 49 from 55, its lowest level since the beginning of 2020.
Given the negative statistics from the world's two largest economies, recession fears have resurfaced after a brief absence during the last week, primarily owing to weaker US inflation data.
On a different page, stories indicating improved coronavirus circumstances in China's financial capital Shanghai and the reopening of the trading of Russian bonds on Wall Street failed to increase the appetite for risk. In addition, Wall Street Journal (WSJ) reports of a possible meeting between US Vice President Joe Biden and his Chinese counterpart Xi Jinping could boost the risk-on sentiment. In the same vein, President Xi of China suggested additional initiatives to revitalize the world's second-largest economy.
The United States, South Korea, and Japan engaged in a missile warning and ballistic missile search and tracking exercise last week off the coast of Hawaii, the Pentagon announced on Monday. The United States and South Korea will conduct joint military exercises between August 22 and September 1. The geopolitical concerns add to the market sentiment and impact on the USD/JPY exchange rate.
In this context, US 10-year Treasury yields print a three-day downtrend around 2.775%, while S&P 500 Futures fall by at least 0.13 percent intraday. Moving forward, risk catalysts and secondary activity and housing statistics from the United States can provide intraday traders with entertainment.
Within a three-week-old symmetrical triangle between 132.35 and 134.20, the 10-DMA protects near-term USD/JPY gains near 133.80.
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