Advance US Q1 GDP Preview: What to Expect of USD/JPY?
pair nosedived to 108.00 mark after the Bank of Japan announced the
outcome of its April monetary policy meeting where the central bank
surprised markets and left its monetary policy unchanged. The decision
disappointed market players who were expecting that the central bank
would announce further easing measures to stimulate the economy.
Weak US GDP print to push back Fed rate-hike expectations
The next event risk that would be on investors radar is the first estimate of US GDP growth rate for the first quarter of 2016, scheduled for release in a short while from now. Consensus estimates of 0.7% growth point to a weaker growth during Jan.-March quarter as compared to a strong growth rate of 1.4%, 2% and 3.9% in the previous three quarters.
The US economy has been adding an average of 209,000 jobs per month during the first quarter of 2016, hence, a surprisingly strong GDP print would resurface expectations of June Fed rate-hike. However, markets are unlikely to cheer mildly positive data, as there would be two more monthly jobs reports to monitor before the Fed meets again in June.
Meanwhile, a weaker reading could be seen the next trigger to push back expectations of a Fed rate-hike, thus pushing the USD/JPY pair further deep into the negative territory.
Technical levels to watch for USD/JPY
Should US GDP disappoint, the pair is likely to decisively push through 108.00 handle and revisit April low of 107.63. Weakness below April lows would now open room for continuation of the pair’s near-term depreciating move towards Oct. 2014 lows support near 105.30-20 area.
Meanwhile, should the GDP data surprises on the upside, a renewed USD buying interest could lift the pair towards 108.65-70 immediate resistance. Beyond this immediate resistance, short-covering could further lift the pair towards its next important resistance near 109.50-60 region.