Yen crawls higher after weak Japan GDP data

The USD/JPY price retreated slightly even after the relatively weak Japan GDP data. The pair is trading at 115.35, which is about 0.85% below its highest level last week. 

Japan GDP data

The Japanese economy expanded at a slower pace than expected in the fourth quarter. According to the statistics agency, the economy expanded by 1.3% from Q3. While this was an improvement from the previous quarter’s contraction of 0.9%, it was worse than the median estimate of 1.4%.

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On a year-on-year basis, the economy expanded by 5.4%, which was lower than the median estimate of 5.8%. The economy weakened by 3.6% in the same period.

The statistics agency attributed the recovery to strong personal consumption. Household spending rose by 2.7% after contracting by 1.3% in the third quarter. 

This performance was offset by the weak external demand and capital expenditure. External demand rose by 0.2% while capital expenditure rose by 0.4%.

Economists expect that the Japanese economy will struggle in the first quarter because of the Omicron surge. The government announced some restrictions in Q1 to quell the spread of the virus. In a a nite, analysts at Bloomberg said:

“We expect GDP to shrink in 1Q 2022. Virus curbs that cover areas accounting for about 90% of GDP are likely to weigh on consumer spending. The restrictions could also delay the implementation of some measures in a fiscal stimulus package approved in December.”

The next key catalyst for the USD/JPY pair will be the upcoming US producer price index (PPI) scheduled for Tuesday. Economists expect the data to show that the headline PPI rose by 9.1% in January while core PPI fell to 7.9%.

USD/JPY forecast

The USD/JPY pair retreated slightly even after the relatively weak Japan GDP data. It is trading at 115.37, which is about 0.85% below the highest level last week. The pair is slightly above the lower side of the ascending channel that is shown in red. It also moved slightly below the 25-day and 50-day moving averages while the MACD has moved closer to the neutral level. Therefore, there is a likelihood that the pair will continue falling as bears target the lower side of the channel. This view will be invalidated if the price moves above the key resistance at 115.72.

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