USD/JPY hits 8-day low, ignores Japan's downward revision of GDP

• Japan's government revised down its GDP and CPI forecast for the current and next fiscal year. So far, however, that has failed to put a bid under USD/JPY.
• The pair continues to slide despite an uptick in the S&P 500 futures.

The USD/JPY pair is currently trading at 112.70, having hit an eight-day low of 112.65 soon before press time.

Japan's government revised lower its fiscal 2018 gross domestic product (GDP) forecast to 0.9 percent from the previous projection of 1.5 percent. Further, the economy is now seen expanding 1.3 percent in fiscal 2019, down from the previous forecast of 1.5 percent.

The forecast for consumer price index (CPI) in fiscal 2018 has also been revised lower to 1.0 percent from 1.1 percent. Also, the CPI projection for fiscal 2019 has been trimmed to 1.1 percent from 1.5 percent.

The downward revision of Japan's inflation and GDP forecasts only reinforced the view that the Bank of Japan (BOJ) is unlikely to move the needle on QE or interest rates any time soon, meaning the Fed-BOJ divergence is set to rise further in favor of the dollar bulls.

So far, however, the pair has paid little heed to Japan's downward revision of the GDP and inflation forecasts. Moreover, the pair is flashing red, despite the 0.44 percent gain in the S&P 500 futures.

It appears as though the markets are pricing in the possibility of the Fed adopting a wait-and-see approach for 2019 by selling dollars. The Fed is also expected to hike rates by 25 basis points tomorrow.

USD/JPY Technical Levels