Today, on May 15th, the US Dollar is still showing some strength against the Japanese Yen, even though the gains a minor – just 0,05% - after stronger economic figures from Japan.
It appears that the pace of the Japanese economic growth accelerated in Q1 2014 despite overall global economic weakness at that time. The growth took place thanks to much higher domestic demand in advance of a sales tax hike coupled with stronger employment figures. The currency pair (USDJPY) was trading around 101,93 before the start o the European trading session, Market Leader reports.
In particular, according to the report published today, the Japanese GDP increased by 5,9% y/y with a glance at seasonality. These figures definitely indicate an economic revival in the Japan after a slowdown seen previously (in late 2013). This also means that Japanese consumers are still positive about the near-term prospects of the national economy.
Apparently, higher consumer spending triggered by the forthcoming tax hike made Japanese companies increase their production and investments, thereby creating new jobs and raising salaries for extra working hours.
Personal consumption boosted by 8,5% y/y. The growth was so strong that it helped the economy ignore the negative impact of the US economic slowdown, which is the biggest outlet for Japanese exporters.
Still, the uncertainty around the global demand keeps on affecting the situation. The economic slowdown in China is expected to weaken the economic growth in Asia in general. Half of the Japanese export comes to China. Still, the Bank of Japan and the IMF predict that the economic recovery in Europe and the USA will make up for the current weakness of the Chinese economy.
Will Japan be able to come back to decent economic growth after the tax hike? This will depend on domestic reforms, especially in the local service sector, which accounts for more than 705 of the entire national economy of Japan.
USDJPY Prospects
According to the recent analysis conducted by Masterforex-V Academy, the H1 chart of USDJPY indicates big-scale long-term consolidation of the US Dollar against its Japanese counterpart.
In particular, the price has been consolidating within the 101,321-103,012 range since January 2014. This tendency started after the price rallied up to 105,420. The direction in which the price will come out of the range, is going to determine the near-term prospects of USDJPY.
In order to define the key mid-term levels, it is worth looking at the H4 chart of USDJPY. Here we can see a price range between 101,651 and 102,362. We have 2 scenarios: either another rally along with the existing long-term trend or a bearish move along with the mid-term trend (which is a reaction to the long-term one).
If USD goes further up against JPY backed by positive stats and JPY sales, we may expect a rally up to 102,362, a break above which will give way to 102,555, 102,785 and 103,012.
Otherwise, we will see a decline backed by stronger economic figures from Japan. If this is the case, the targets to watch are 101,651, 101,428 and 103,321.
