Japan's GDP grew less than expected.

The Japanese yen appreciated slightly amidst the weakening of the U.S. dollar, bolstered by data supporting the idea that the Federal Reserve will begin to lower interest rates in September. Both overall inflation and core inflation in the U.S. began to slow down in April. These factors allowed the yen to appreciate despite weaker-than-expected GDP data in Japan.

Japan's GDP contracted by 0.5% quarter-on-quarter in Q1 2024, indicating that private consumption, which accounts for more than half of the economy, has decreased for four consecutive quarters. This has also impacted household spending, which has been facing continuously rising living costs and relatively stagnant wages. Additionally, reduced automobile production continues to have a direct effect on GDP, as car exports, Japan's main export commodity, have been decreasing in line with declining foreign demand.

Household spending in Japan fell by 1.2% year-on-year in March, compared to market expectations of a 2.4% decline, following a 0.5% decrease in the previous month. This reflects issues with the cost of living and rising expenses. Spending on housing continued to decrease, including reduced expenditures on furniture and household appliances. However, food expenses increased due to ongoing rises in production and import costs, with the weakened yen significantly contributing to higher import prices.

The Bank of Japan (BOJ) continues to prioritize inflation risk and has stated that it is prepared to adjust monetary policy to further pressure inflation if necessary. However, investors anticipate that this accommodative monetary policy will remain for some time. Meanwhile, the yen's depreciation and rising commodity prices mean that the BOJ must work closely with the government to sustainably achieve the 2% inflation target.

The yield on Japan's 10-year government bonds fell below 0.93% due to weaker-than-expected GDP data. Concurrently, the BOJ announced a reduction in the amount of government bonds it will purchase this week. This marks the first such move since ending the negative interest rate policy in March. The BOJ proposed to buy 425 billion yen of government bonds with maturities of more than 5 to 10 years on Tuesday, 50 billion yen less than the previous operation. Additionally, BOJ Governor Kazuo Ueda stated, "It is appropriate for the bank to reduce the amount of government bond purchases as we exit the accommodative monetary policy."

Techical analysis data (5H)

Resistance: 155.96, 156.05, 156.13

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 155.71 - 155.78 but cannot break the support at 155.78, you may set a TP at approximately 156.05 and SL at around 155.61 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 155.96 - 156.05, you may set a TP at approximately 156.13 and SL at around 155.71 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 155.96 - 156.05 but cannot break the resistance at 155.96, you may set a TP at approximately 155.71 and SL at around 156.13 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 155.71 - 155.78, you may set a TP at approximately 155.61 and SL at around 156.05 or according to your acceptable risk.

Pivot point May 17, 2024 07:54 PM. GMT+7