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

USD/JPY made a new high for the year, but it made a quick reversal after that, although the trend is still bullish so we opened a buy signal

Skerdian Meta•Thursday, February 23, 2023•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

US GDP

  • 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.

USD/JPY Live Chart

USD/JPY
ABOUT THE AUTHOR See More
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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