USD/JPY forecast after Japan GDP data and as Topix index soars
- The USD/JPY exchange rate rose to the highest point in two weeks.
- Japan published strong GDP numbers on Wednesday.
- The economy expanded by 0.1% QoQ and by 1.6% on a YoY basis.
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The USD/JPY exchange rate drifted upwards on Wednesday morning even after the relatively upbeat Japan GDP numbers. It jumped to a high of 136.52, the highest level since May 2 of this year. Similarly, the GBP/JPY and EUR/JPY rates rose to 170.22 and 148.38, respectively.
Japan GDP data
Japan published strong economic numbers on Wednesday morning. According to the statistics agency, the country’s economy expanded from 0.0% in the fourth quarter to 0.4% in Q4. That increase was better than the medium estimate of 0.1%.
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The economy moved from a contraction of 0.1% in Q4 to an annual growth of 1.6% in the first quarter. Again, this growth was better than the expected 0.7%. The report noted that the growth was mostly because of capital expenditure, which expanded by 0.9% in Q1.
In the same period, consumer spending jumped from 0.2% to 0.6%, higher than the median estimate of 0.4%. This growth was offset by a 0.2% dip in the important external demand.
Japan’s economy has several tailwinds. First, as I wrote in this article on Tuesday, foreign investors are buying Japanese stocks, which explains why the Topix has soared to the highest point in 33 years.
Second, the cost of energy is falling, with natural gas sitting at the lowest level since 2021. Crude oil prices have crashed by double-digits in the past few months. This is notable since Japan depends on imported energy.
Further, Japan’s relationship with South Korea is improving. Earlier this week, Samsung announced that it will build a chip plant in Japan, which is a positive catalyst.
The 4H chart shows that the USD/JPY pair jumped to the highest level since May 2. As it rose, the pair moved above the important resistance point at 135.43, the highest point on May 10. It has moved above the 25-day and 50-day exponential moving averages (EMA).
The pair has also jumped above the ascending trendline shown in blue while the MACD has moved above the neutral point. Therefore, the USD to JPY pair will likely continue rising in the coming days as buyers target the key resistance point at 137.77, the highest point this month.
If this happens, it also means that the EUR/JPY and GBP/JPY will also continue rising because of the close correlation that exists among the three pairs.
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