JAPANESE YEN WEAKENS AFTER DOWNWARD REVISION TO GDP

The Japanese yen traded lower on Thursday but remained well supported even as government economists took a knife to first quarter GDP estimates.

Japan’s economy expanded just 1% annually in the first quarter, well below last month’s initial estimate of 2.4%, the Cabinet Office said in a report on Thursday. Compared to the fourth quarter, the economy expanded just 0.3%, down from an initial estimate of 0.5%.

Despite the downward revision, the Japanese economy has expanded for five straight quarters, which is the longest stretch of uninterrupted growth in more than a decade.

The yen slipped from six-week highs following the release. The US dollar index (DXY) was trading 0.1% higher through North America’s early morning session.

The euro traded lower even as government economists boosted their estimate of Eurozone GDP. The euro-area economy expanded 0.6% in the first quarter, higher than the initial estimate of 0.5%, Eurostat reported Thursday. In annualized terms, this translated into a 1.9% increase.

The European Central Bank (ECB) voted to leave monetary policy steady on Thursday, a decision that was widely expected by the financial markets. The main interest rate remains at zero and the deposit rate was held at -0.4%.  

In commodities, oil prices approached year-to-date lows after the US Energy Information Administration (EIA) showed an unexpected build in commercial crude inventories. West Texas Intermediate (WTI) crude reached a session low of $45.33 a barrel.

USD/JPY

The USD/JPY has been on a downward spiral in recent weeks. The pair recently stumbled on weak US yields. Treasuries remain under pressure amid signs the new GOP administration will be hard-pressed to deliver on its campaign promises. The USD/JPY faces immediate support at 109.12, which is the low from 7 June. On the other side of the ledger, resistance is spotted above at110.74, which is the high from 2 June.

EUR/USD

The euro reached a session high of 1.1270 US before reversing course to trade 0.3% lower at 1.1228 US. The EUR/USD has been rangebound for the entire week, as traders fail to break above 1.13. Any newfound strength in the dollar ahead of next week’s FOMC meeting could limit the euro’s ability to extend its rally toward that key level. However, the common currency remains generally well supported based on short-term technical indicators. Fundamentals could play an important role in generating further growth for the pair.

WTI Oil

WTI established a new low on Thursday, reflecting renewed volatility in the energy markets. Prices were last seen trading around $45.50 a barrel. The contract faces immediate support at $43.75, which is the swing low from early May. Traders should carefully monitor the Baker Hughes rig count data on Friday for further price action.