USD/JPY Pair Surges Above Key Resistance Level on Strong US Economic Data

The USD/JPY pair made a significant upward move, surpassing the crucial resistance level of 140.50, following a report by the United States Bureau of Economic Analysis, highlighting the economy’s resilience in the second quarter. The US Dollar Index (DXY) rebounded swiftly, recovering from its dip near 100.60, further bolstering the pair’s strength.

The US Gross Domestic Product (GDP) showed surprising expansion, growing at a higher pace of 2.4% compared to the first quarter’s 2.0%. Investors had anticipated GDP to expand at a rate of 1.8% on an annualized basis. Adding to the positive economic outlook, Durable Goods Orders data for June soared by an impressive 4.7%, surpassing expectations of 1.05% and May’s figure of 1.8%. This robust economic data signals a significantly strong outlook for the US economy.

In addition to the positive GDP and Durable Goods Orders data, weekly jobless claims for July 21 remained below expectations. Only 221k claims were received from first-timers, while expectations were set at 235k. These indicators, along with a tight labor market, underscore the resilience of the US economy and may prompt the Federal Reserve (Fed) to announce one more interest rate hike in September.

Fed Chair Jerome Powell has emphasized that September’s monetary policy will hinge on economic data, indicating that upbeat indicators could lead to another interest rate hike, potentially pushing interest rates to 5.50-5.75%.

Simultaneously, the US Dollar Index is inching closer to a two-day high of 101.58, buoyed by positive economic data. Moreover, the S&P 500 is anticipated to open on a bullish note, influenced by optimistic overnight futures signals.

Looking ahead, the Japanese Yen is expected to remain on edge as investors await the Bank of Japan’s (BoJ) interest rate decision, scheduled for July 28. Economists at Credit Suisse believe the FX market has already priced in a considerable probability of a hawkish development, such as widening the YCC trading band for the 10-year JGB or signaling that the end of YCC is not imminent. These developments will be crucial factors shaping the USD/JPY pair’s trajectory in the coming days.