NFP and Japan Q1 GDP Contraction Keeping Uptrend in USDJPY

USDJPY retreated lower early last week, but it found strong support around the 50-day Simple Moving Average (SMA), which has been a key level for buyers to step in and drive the price higher. This moving average seems to be acting as a reliable dynamic support level, indicating the strength of the bullish trend, and last week we saw the price bounce twice from this moving average.

The recent bounce off the 50 SMA on Wednesday, followed by a significant rally on Friday worth nearly 200 pips, which sent the price above 157, suggests that buyers are still firmly in control of the market. This rally has potentially reaffirmed the larger bullish trend after a brief period of weakness earlier last week.

Looking ahead, the bullish momentum seems to be picking up, but in case of a pullback, we’re looking to buy this forex pair at the next significant support level could be around 155, just above the 50 SMA. Beyond that, the low around the 154.50s from last week could serve as another support level in case of any pullbacks in USD/JPY .

USD/JPY Chart Daily – The 50 SMA Holds As Support

Last night we had a batch of economic data from Japan, with the Current Account, Bank Lending and the Final Q1 QoQ and Final GDP Price Index YoY repots, however the GDP reports are a bit outdated since they are for the first quarter.

Japan’s Final Q1 GDP and GDP Price Index Report:

The final Q1 GDP report for Japan indicates a significant economic slump, with the following key data points:

GDP Figures:

1. Annualized GDP (Q1 2024, revised):
   • -1.8% (indicates a massive economic slump)
2. Quarter-on-Quarter GDP (SA) (Q1 2024, final):
   • -0.5% (vs. 0.5% expected)
3. Year-on-Year GDP (Q1 2024, final):
   • 3.4% (vs. 3.6% expected)
   • Previous: 3.6%

Analysis and Implications:

Economic Slump:

• The significant annualized GDP decline of -1.8% highlights a severe contraction in Japan’s economy during the first quarter. This is a substantial revision from preliminary estimates and indicates deeper issues within the economy.

Quarter-on-Quarter Performance:

• The quarter-on-quarter GDP (seasonally adjusted) showed a decline of -0.5%, against an expected growth of 0.5%. This negative growth underscores the challenges faced by the Japanese economy, possibly due to weaker domestic demand, supply chain disruptions, or global economic headwinds.

Year-on-Year Growth:

• The year-on-year GDP growth came in at 3.4%, slightly below the expected 3.6% and the previous figure of 3.6%. While still positive, the lower-than-expected growth suggests that the economic recovery is slower than anticipated.

USD/JPY Live Chart

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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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