Buying the Retreat in USD/JPY After the Lower US GDP Revision in Q4

Posted Thursday, February 23, 2023 by
Skerdian Meta • 2 min read

USD/JPY was quite bearish since late October as it reversed down from 152, but turned bullish since early this month, reversing from 127.20s, climbing to 135.30s earlier today before a sharp reversal in the last two hours. The bullish price action earlier today might have received some added momentum from stops as the February high of 135.23 broke.

But, that didn’t last long and then bearish reversal followed. The US Q4 GDP revisions were released a while ago and they showed a slight downward revision, although that didn’t deter USD bulls, who are still pushing higher. But, the JPY is finding some fresh bids, after the report which is listed below:

Fourth Quarter 2022 GDP Second Estimate

Q4 2022 GDP (second reading) +2.7% vs +2.9% expected
The advance reading on Q4 was +2.9% vs +2.6% expected
Q3 was +3.2% annualized
Personal consumption +1.4% vs +2.1% advance reading
Core PCE prices +4.3% vs +3.9% expected
PCE prices +3.7% vs +3.5% expected
GDP final sales +1.2% vs +1.4% prelim
Corporate profits after tax +% vs -% in Q1
Consumer spending on durables +1.8% vs +0.5% advance
Full report

Percentage point changes:

Inventories pp +1.47 pp vs +1.46 pp in advance
Net trade pp +0.46 vs +0.56 pp advance
Government spending +0.63 pp vs +0.64 pp advance
Goods trade -0.13 pp
Services added +1.06 pp

This isn’t a great report but the market may see it as shifting growth to Q1 2023 instead. The goods sector of the economy is in a recession, after declining for four quarters Services is carrying all the weight but the momentum is slowing.

In fact, the USD has been finding some fresh bids after the GDP report, but this pair has since reversed. US and European bonds are showing a decent bid, especially the Italian bonds, which might be helping the JPY. Although, moving averages have been doing a good job as support on the H1 chart, as shown above, so we decided to open a buy USD/JPY signal above the 100 SMA (green) which has been the ultimate support recently.