USD/JPY consolidates this week's gains above mid-108s ahead of US GDP data

• US 10-year T-bond yield stays calm following Thursday's upsurge.
• US Dollar Index pushes higher toward 98 mark ahead of key data.
• Real GDP is expected to expand by 1.8% in second-quarter in US.

The USD/JPY pair added 50 pips on Thursday boosted by the rising US Treasury bond yields but struggled to build on its recent gains as investors remain on the sidelines ahead of key macroeconomic data releases from the US. As of writing, the pair was up only a couple of pips on the day at 108.66.

The 10-year US T-bond yield yesterday rose nearly 2% as European Central Bank President Draghi's neutral tone caused investors to think that the aggressive dovish shift expected in major central banks' policy outlook will not be arriving anytime soon.

US economic growth is expected to lose steam in Q2

Moreover, the upbeat Durable Goods Orders data from the US provided an additional boost to the pair by allowing the USD to outperform its rivals. Markets are now eagerly waiting for the US Bureau of Economic Analysis to publish its first estimate of the second-quarter economic growth, which is expected to soften to 1.8% on a yearly basis from the 3.1% recorded in the first quarter.

Previewing the data, "The Bloomberg consensus median expects a slowdown in annualised growth to 1.8% q/q from the previous 3.1% q/q, while we forecast GDP grew at an annualised rate of 2.3% in Q2 19, led by robust consumer spending and government expenditures," Danske Bank analysts said. "The latter component growth is likely to be derived from a rebound in federal government hours after the negative contribution of the long shutdown in Q1 19.”

Technical levels to consider