USDJPY on Friday dropped -0.76% to 156.45. Week ending 2024-12-20 rose 1.95%. What’s going on.

USDJPY Analysis

Performance
Period	Pct	Chg	Momentum
Friday	-0.76%	-119.2 Pips
Week 242024-12-20	1.95%	299.9 Pips	December	3.49%	527.8 Pips

Upcoming key events for the new week (London Time)

Wed 05:00 AM Christmas Day
Thu 11:30 PM Tokyo CPI (Inflation Rate) (12-mth)

What happened over the week

The United States saw mixed economic indicators recently. The Index of Consumer Expectations in December slightly decreased to 3% from November’s 3.1% as reported by the University of Michigan. However, the Index of Consumer Sentiment remained steady at 74 points. November’s PCE Price Index showed movement with a slight decline to 0.1% from October’s 0.3% but remained stable on a 12-month basis at 2.8% according to the Bureau of Economic Analysis. Similarly, the U.S. GDP annual rate saw an increase to 3.1% in Q3 from 2.8% in Q2. Meanwhile, personal income decreased sharply to 0.3% down from 0.7%, even as consumer spending reported an increase. Unemployment insurance claims showed improvement, dropping to 220K from 242K. The Federal Reserve’s interest rate decision saw a drop to 4.5%, with the Fed chair cautious about future cuts amidst the evolving economic landscape. Housing starts diminished slightly to 1.289 million, though building permits rose to 1.505 million, indicating varied economic activity and adjustment.

Japan saw upward inflation movements, with the national CPI inflation rate excluding fresh food rising to 2.7% in November from 2.3% in October, while the overall CPI edged to 2.9% from 2.3%, as per the Statistics Bureau of Japan. This reflects stronger inflationary pressures domestically. Japan’s trade balance showed an improvement in November at -117.6¥ from -462.1¥ in October, helped in part by a decrease in imports to -3.8% from 0.4%. Furthermore, export growth improved to 3.8% from 3.1%, signaling strengthening external demand. The Bank of Japan’s short-term policy interest rate remained unchanged at 0.25% against the backdrop of these economic developments.

The dynamics between the economic situations in the U.S. and Japan create an interesting context for USDJPY movements. The mixed U.S. economic data, compounded by the Fed’s lower interest rates and improved unemployment claims, could place downward pressure on the USD. Meanwhile, Japan’s inflation rise and trade improvements support the JPY. As a result, the USDJPY could face volatile movements, with a possibility of further declines considering the recent drop and its interaction with economic fundamentals and interest rate dynamics, alongside market reactions to upcoming data like Tokyo’s CPI.

From social media

The BOJ released the Statement on Monetary Policy after the December 18 and 19 Monetary Policy Meeting.https://t.co/bmgORqQWF0 pic.twitter.com/hwjZwXDl6e

— Bank of Japan (@Bank_of_Japan_e) December 19, 2024

What can we expect from USDJPY for the new week and what happened on Friday?

USDJPY on Friday dropped -0.76% to 156.45. Price is above 9-Day EMA while Stochastic is rising. For the week ending ,2024-12-20, the pair rose 1.95% or 299.9 pips higher.

Looking ahead, USDJPY looks mixed as the pair is likely to consolidate above week low of 153.34.

For the new week, our technical outlook looks bullish, immediate upside resistance level at 158.47 (WR1) with break above could target 160.49 (WR2). On the downside, we are looking at week low of 153.34 as an important support. Break below this level could weaken the current bullish momentum. A break above 157.93 would suggest bullish bias after recent positive movement.

For the month of December, USDJPY is up by 3.49% or 527.8 pips higher.

Weekly key levels to watch out:

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Gross Domestic Product, (Third Estimate), Corporate Profits (Revised Estimate), and GDP by Industry, Third Quarter 2024 Source: Bureau of Economic Analysis
Statement on Monetary Policy Source: Bank of Japan
(Reference) Review of Monetary Policy from a Broad Perspective: Summary Source: Bank of Japan
Review of Monetary Policy from a Broad Perspective Source: Bank of Japan
U.S. International Transactions, 3rd Quarter 2024 Source: Bureau of Economic Analysis
Federal Reserve Board and Federal Open Market Committee release economic projections from the December 17-18 FOMC meeting Source: Federal Reserve
Federal Reserve issues FOMC statement Source: Federal Reserve
New Residential Construction Source: Census Bureau
Manufacturing and Trade Inventories and Sales Source: Census Bureau
Trade Statistics (November 2024 [Provisional]) Source: Ministry of Finance
Advance Monthly Sales for Retail and Food Services Source: Census Bureau
Tankan (Dec.): Comprehensive Data Set Source: Bank of Japan