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The USD/JPY pair was little changed in the Asian session as the market reflected on the latest household spending data from Japan. It is trading at 108.92, which is 0.50% higher than last week’s low of 108.33.
Japan household spending rises
The Japanese economy is recovering from the coronavirus pandemic. The latest numbers published by the country’s statistics agency revealed that household spending started to gain pace in March. In total, spending rose by 7.2% on a month-on-month basis. This was better than the previous increase of 2.4% and was the fastest growth since July last year.
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The spending rose by 6.2% on a year-on-year basis after falling by 6.6% in February. The MoM and YoY numbers were better than what analysts were expecting. Household spending is an important figure since it is the biggest contributor to the country’s GDP.
The USD/JPY pair is also reacting to the latest Bank of Japan summary of opinions. The policymakers warned that the country faced uncertainties as it emerges from the coronavirus pandemic. As such, they stressed on the need for more fiscal and monetary support for the economy.
Japan, like many Asian countries, is seeing robust demand for its goods like machinery and autos. However, the country is also battling the pandemic. In fact, it has announced a state of emergency in some key locations like Tokyo. At the same time, the rollout of the vaccine has been relatively slower than in other countries.
The USD/JPY is also reacting to the happenings in the United States. On Friday, the non-farm payrolls disappointed in a major setback to the Biden administration. The economy added just 266,000 jobs while its unemployment rate rose.
Looking ahead, the pair will react to the upcoming US inflation numbers that will come out on Wednesday. It will also react to statements by the Federal Reserve officials.
USD/JPY technical analysis
The USD/JPY price has bounced back from last week’s low of 108.33. On the four-hour chart, it is stuck at the 25-day and 50-day exponential moving averages (EMA) while the Relative Strength Index (RSI) is at the neutral level of 47. The pair also seems to be forming a head and shoulders pattern, which is usually a bearish sign. Therefore, it will likely break out lower as bears target last week’s low of 108.33. Nonetheless, a move above 109.50 will invalidate the bearish thesis.
