Yen Buoyed by Upbeat Japanese GDP Data

• Japan’s gross domestic product (GDP) expanded at an annual rate of 2.7% between January and March.

• Japan’s revision of statistics has eliminated the technological slump reported in the second half of last year.

• The odds of a global rate cut this year have diminished.

Today’s USD/JPY forecast is slightly bearish. Thursday’s revised data showed Japan’s economy posted strong growth from January to March, better than initially expected. A recovery in domestic spending and corporate restocking drove growth. This helped counteract a decline in exports due to weak global demand.

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Inflation is now at its highest level in 40 years, making sustained wage growth essential to the world’s third-largest growing economy. Both the Bank of Japan and the government consider such wage increases to be an essential policy objective.

Japan’s gross domestic product (GDP) expanded at an annual rate of 2.7% between January and March. The result beat the 1.6% growth forecast and the median economist forecast of 1.9%.

Additionally, the revised figures eliminated the reported technological recession in the second half of 2022. Revised data show GDP increased by 0.4% in October-December, following a 1.5% contraction in July-September.

Meanwhile, the dollar faced some downward pressure. Still, rising U.S. Treasury yields were a boost. Traders have weighed the possibility of another rate hike by the US Federal Reserve, even if it is suspended next week.

In particular, unexpected interest rate hikes by the Bank of Canada and the Central Bank of Australia have raised expectations that global central banks still have room to tighten monetary policy. As a result, the chances of a rate cut later this year have diminished.

USD/JPY major events today

Investors will pay close attention to the US unemployment claims report, which provides the latest outlook for the labor market. If the labor market remains strong, the Fed could keep raising interest rates for a long time.

USD/JPY Technical Forecast: The bulls are gaining momentum for a breakout of 140.00.

On the chart, USD/JPY has turned down after trying to break out of the 140.00 resistance level. Despite the pullback, the bulls are still in control as the price is trading above the 30-SMA. Additionally, the RSI is just above 50, confirming the bullish momentum.

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If the bulls return to the 30-SMA support, the price is likely to move higher and rise above the 140.00 resistance level. This will allow the bulls to set their sights on the resistance level at 141.01.

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