- Japan’s gross domestic product expanded by 2.7% annually in January-March.
- Revised Japanese figures eliminated the reported technical recession in the second half of last year.
- The likelihood of global rate cuts later in the year has diminished.
Today’s USD/JPY forecast is slightly bearish. Revised data on Thursday showed that Japan’s economy surpassed initial expectations and experienced significant growth in January-March. A recovery in domestic spending and company restocking drove the growth. This countered the decline in exports caused by weakened global demand.
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Inflation is currently at a forty-year high, making sustained wage hikes crucial for expanding the world’s third-largest economy. Both the BOJ and the government consider these wage increases essential policy objectives.
Japan’s gross domestic product expanded by 2.7% annually in January-March. Consequently, it exceeded the estimated 1.6% growth and economists’ median forecast of a 1.9% rise.
Furthermore, the revised figures eliminated the reported technical recession in the second half of 2022. According to the revised data, GDP increased by 0.4% in October-December, following a 1.5% contraction in July-September.
Meanwhile, the dollar faced some downward pressure. Still, it received a boost from higher US Treasury yields. Traders considered the possibility of an additional interest rate hike by the US Fed, even if it takes a pause next week.
Notably, the unexpected rate increases by the Bank of Canada and Australia’s central bank have increased expectations that central banks worldwide still have room to tighten their monetary policies. As a result, the likelihood of rate cuts later in the year has diminished.
USD/JPY key events today
Investors will pay close attention to the initial jobless claims report from the US that gives a recent view of the labor market. Continued strength in the labor market could prompt the Fed to keep rates higher for longer.
USD/JPY technical forecast: Bulls gather momentum for a break above 140.00.
In the charts, USD/JPY has pulled back after attempting to break above the 140.00 resistance level. Despite the pullback, bulls are still in control because the price trades above the 30-SMA. Furthermore, the RSI supports bullish momentum as it is slightly above 50.
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If bulls return at the 30-SMA support, the price will likely push higher to cross above the 140.00 resistance level. This would allow bulls to set their sights on the 141.01 resistance level.
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