Weak Data Overlooked as Yen Rises on Risk-Off Mood

Action Insight Daily Report 5-16-25

Weak Data Overlooked as Yen Rises on Risk-Off Mood

Mild risk-off mood is helping Yen to extend its near-term rebound, despite fresh signs of economic weakness at home. Japan’s economy was already showing signs of strain even before the impact of US tariffs, with Q1 GDP contracting more sharply than expected. BoJ is left in an increasingly precarious position, wedged between deteriorating growth and persistent inflationary pressures.

A recent Reuters poll taken between May 7 and 13 revealed a significant shift in market expectations, with 67% of economists now projecting that BoJ will hold its policy rate at 0.50% through the third quarter. That’s up sharply from just 36% a month ago, highlighting how tariff-related risks have changed expectations for near-term tightening.

On the trade front, Japan is preparing a third round of negotiations with the US, as it seeks to secure exemptions from tariffs on automobiles and auto parts. In return, Tokyo is reportedly considering a set of concessions, including increased imports of US corn and soybeans, regulatory changes to auto inspection standards, and cooperation in shipbuilding technology.

Chief negotiator Ryosei Akazawa is expected to travel to Washington as early as next week, though the timeline hinges on progress in working-level talks. Meanwhile, Finance Minister Katsunobu Kato will travel to Canada for G7 meetings, where he may hold bilateral discussions with US Treasury Secretary Scott Bessent on foreign exchange matters.

Overall for the week so far, Yen is currently the top performer, followed by Sterling and then Dollar. Kiwi is the weakest, trailed by Euro and Swiss Franc. Loonie and Aussie sit in the middle of the pack. The overall tone in the currency markets remains mixed.....

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USD/JPY Daily Outlook

Daily Pivots: (S1) 145.13; (P) 145.97; (R1) 146.53; More...

Intraday bias in USD/JPY remains neutral and more consolidations could be seen below 148.64. . Further rally is expected as long as 144.02 resistance turned support holds. As noted before, fall from 158.86 could have completed 139.87 already. Above 148.64 will target 61.8% retracement of 158.86 to 139.87 at 151.60 next. However, firm break of 144.02 will bring retest of 139.87 low instead.

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Economic Calendar
GMT Ccy Events Actual Forecast Previous Revised
22:30 NZD Business NZ PMI Apr 53.9 53.2
23:50 JPY GDP Q/Q Q1 P -0.20% -0.10% 0.70%
23:50 JPY GDP Deflator Y/Y Q1 P 3.30% 3.20% 2.90%
03:00 NZD RBNZ Inflation Expectations Q2 2.29% 2.06%
04:30 JPY Industrial Production M/M Mar F 0.20% -1.10% -1.10%
09:00 EUR Eurozone Trade Balance (EUR) Mar 17.5B 21.0B
12:30 USD Housing Starts Apr 1.37M 1.32M
12:30 USD Building Permits Apr 1.45M 1.48M
12:30 USD Import Price Index M/M Apr -0.40% -0.10%
14:00 USD UoM Consumer Sentiment May P 53 52.2
14:00 USD UoM Inflation Expectations May P 6.50%