USD/JPY forecast: More upside after disappointing Japan GDP data
- The USD/JPY pair held steady after Japan downgraded its Q4 GDP numbers.
- The Japanese economy expanded by 4.6% in Q4 helped by strong consumer spending.
- The pair has also risen because of the ongoing crisis in Ukraine.
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The USD/JPY price tilted higher on Wednesday morning after the latest Japan GDP numbers. The pair is trading at 115.83, which is about 0.25% below the highest level this year.
Japan GDP data
The Japanese economy has had mixed fortunes in the past few months. According to the country’s statistics agency, the economy expanded by 1.1% in the fourth quarter after it rose by 1.3% in Q3. This increase was lower than the median estimate of 1.4%. As a result, the country expanded by 4.6% in the quarter, which was lower than the previous 5.4%.
The bureau attributed the performance to the relatively strong consumer spending, which rose by 2.4% after falling by 1.2% in Q3. The strong performance of consumers was offset by slow growth in capital expenditure and external demand, which rose by 0.3% and 0.2%, respectively.
On Tuesday, data from the agency revealed that Japan’s overtime pay rose by 4.4% in January while average cash earnings rose by 0.9%. Bank lending rose by 0.4%.
These numbers mean that Japan’s economy is doing relatively well as the recovery continues. However, the biggest challenge is how the country will be impacted by the ongoing crisis in Ukraine. Like most countries, Japan has announced a series of sanctions aimed at Russia and its oligarchs.
The USD/JPY has risen in the past few days as investors rush to the safety of the US dollar. The assumption is that the greenback provides a better haven than the Japanese yen because the Fed is expected to hike interest rates this month. The Bank of Japan, on the other hand, is expected to hold rates for a while.
The daily chart shows that the USD/JPY pair has been in a strong bullish trend in the past few months. The pair is trading at 115.83, which is significantly higher than last year’s low of 102. This is a 13% increase. As a result, the pair has moved above the 25-day and 50-day moving averages.
It is also above the ascending trendline that is shown in blue while the Relative Strength Index (RSI) has been rising. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 116.50. A drop below the key support at 114.50 will invalidate this view.