The U.S. is about to release its first growth numbers for the year!
Will volatility around the release be enough to cause a short-term reversal for USD/JPY?
Before moving on, ICYMI, today’s Daily Asia-London Session Watchlist looked at EUR/USD extending an upside breakout on the back of a dollar-bearish bias. Be sure to check that out to see if there is still a potential play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
- Japan’s markets were out on a bank holiday
- Joe Biden’s speech to Congress: five key takeaways
- New Zealand posts nz$33 million trade surplus in March
- ‘Solid bounce’ in business confidence has ANZ rethinking assumptions
- Asian stocks, FX gain on dovish Fed, Biden’s stimulus plans
- European shares near record high on earnings boost
- Germany’s import price inflation fastest since 2011
- German job market data disappoints in further setback for recovery
- German regulators: Binance stock tokens could break security laws
- Government money seen powering U.S. economy in first quarter
Upcoming Potential Catalysts on the Economic Calendar:
- Spain’s unemployment rate at 7:00 am GMT
- Germany’s unemployment change at 7:55 am GMT
- Eurozone consumer sentiment, business sentiment at 9:00 am GMT
- U.S. advance GDP at 12:30 pm GMT
What to Watch: USD/JPY
If we look at the dollar’s performance since the last FOMC statement, we’ll see that the optimism around the U.S. economic recovery mostly translated to gains against fellow safe-havens like the yen and the franc.
All the optimism also meant that the dollar lost pips to “riskier” currencies like the comdolls and the pound.
USD/JPY saw some pullback for most of April but the downtrend was broken some time last week when traders priced in their worries about Biden’s taxes.Today’s U.S. GDP release will tell if USD/JPY can sustain its current upswing. Analysts see the economy growing by around 6.3% in Q1 2021, much higher than the 4.3% uptick in Q4 2020.
If Uncle Sam’s growth surprises to the upside, then USD/JPY can extend its bounce from the 108.50 Fib support. Bulls who are paying attention to the SMA crossover on the 1-hour chart might even jump in to push the dollar to 110.00!
If today’s GDP report disappoints, though, then some dollar fans might think twice about how fast the U.S. economy is really recovering. USD/JPY could drop back down to today’s lows and even test the SMA support areas on the 1-hour time frame.