• US GDP growth stood at 3.2% annualized pace during the first quarter of 2019.
• The USD bulls seemed unimpressed as the growth was led by unsustainable factors.
• Also, weaker price data/intraday slide in the US bond yields prompt some fresh selling.
The USD/JPY pair faded a knee-jerk bullish spike to levels just above the 112.00 handle and might now be headed back towards the lower end of its daily trading range post-US GDP report.
The pair did get a minor lift and built on its intraday steady climb after the advance US GDP report showed that the US economic growth stood at 3.2% annualized pace during the first quarter of 2019. The uptick, however, turned out to be short-lived, rather met with some fresh supply after the details revealed that a major part of the growth was primarily led by unsustainable factors – inventory buildup and government spending.
Adding to this, core PCE fell more than expected to 1.3% during the reported period, from 1.8% in the fourth quarter, while the GDP price index came in at 0.9% vs. 1.7% in the previous quarter and 1.3% expected. Weaker price data triggered a sharp intraday slide in the US Treasury bond yields, which eventually exerted some downward pressure on the US Dollar and prompted some fresh selling around the major.
Meanwhile, the latest optimism over a possible US-China trade deal was further fueled by the news that Chinese President Xi Jinping could meet the US President Donald Trump and sign a trade deal as early as June, should both the leaders finalize a deal to end the trade war. The positive trade-related development might continue to dent the Japanese Yen’s relative safe-haven status and help limit further downside.
The pair, so far, has managed to hold its neck above two-week lows set in the previous session and hence, it would be prudent to wait for a strong follow-through selling before traders start positioning for any further near-term depreciating move as the focus now shifts to next week’s key event risk – the latest FOMC monetary policy update, scheduled to be announced on Wednesday.
Technical levels to watch