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Japanese Yen Analysis: USD/JPY Points Higher as GDP Data Misses Expectations

Japanese Yen Talking Points:

  • Japanese GDP growth came in at -5.1% for Q1 vs. consensus estimate of -4.6%
  • Japanese Yen’s recent price action mirroring decline seen in US Treasury yields
  • USD/JPY forming an Ascending Triangle, break higher may test pre-COVID high of 112

Preliminary data for annualized Q1 Japanese GDP growth missed expectations, coming in at -5.1% versus -4.6% expected. The country continues to struggle with COVID-19. The government declared a third state of emergency on April 25. On a quarter-over-quarter basis (QoQ), the print also missed expectations, coming in at -1.3% versus -1.2% seen.Of significant note, demand for domestic in-person services declined along with international demand for local automobiles. Japan is not the only Asia-Pacific country struggling against the virus, as Singapore and Taiwan are also facing breakouts of their own.

USD/JPY has edged lower in recent sessions following disappointing U.S. economic data. Worse than expected readings on consumer confidence and retail sales last week rekindled the notion that Fed policy may remain accommodative for longer, despite the rise in inflation. While Fedspeak continues to remain dovish, investors will look to Wednesday’s FOMC minutes. Further dovish commentary from officials and a lack of “taper talk” may be enough to maintain market sentiment at current levels.

USD/JPY Daily Chart

Chart created with TradingView

Despite USD bulls taking a backseat in recent sessions, declines in USD/JPY have yet to materially break through the rising 2021 support line. For near-term support, USD/JPY may look to the 50-Day moving average (DMA) at 109.07. Should a bearish trend develop and break through the 2021 trendline, support can be found further below at 105.99 courtesy of the 200 DMA.

Recent price action has seen USD/JPY consolidate around 109.50, historically a significant pivot point for the pair. This consolidation has seen the formation of an Ascending Triangle, hinting at the potential for a significant move in the pair. A notable break higher out of the forming technical pattern may be enough to propel the pair out of April’s range and above the yearly high around 111.00.

— Written by Brendan Fagan, Intern for DailyFX

To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter

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