The Japanese yen strengthened against the US dollar on Monday, reaching a month-long peak following the release of statistics indicating Japan’s return to economic growth in Q4 2023. This development effectively ends the previously declared technical recession.
Japan’s GDP experienced a quarterly increase of 0.1% and an annual growth of 0.4%. These figures revise earlier estimates, suggesting 0.1% and 0.4% declines, respectively. In comparison, the Japanese economy contracted by 0.8% quarterly and 3.3% annually in Q3 2023.
The positive economic data have fuelled market speculation about a potential interest rate hike by the Bank of Japan, with some economists and traders anticipating such a move as soon as March.
Bank of Japan board member Junko Nakagawa recently commented on the visible prospects for achieving inflation targets and a positive wage cycle, further supporting the yen.
The Japanese currency is currently benefitting from the weakening US dollar and a drop in US government bond yields amid the Federal Reserve’s dovish rhetoric.
Technical Analysis of USD/JPY
On the H4 USD/JPY chart, a correction wave to the 146.48 level has been completed (tested from above). The market is now forming a consolidation range above this level, expecting to break upwards and initiate the fifth growth wave towards 152.72. The MACD oscillator supports this scenario, with its signal line trading below zero at minimums and poised for growth.
On the H1 USD/JPY chart, a correction wave to 146.48 has finished. A growth impulse to 147.26 and its correction to 146.55 have been executed, essentially setting the consolidation range boundaries. With an upward breakout, growth towards the 148.00 level is anticipated. This target is the first in the growth wave. The Stochastic oscillator confirms this scenario, with its signal line above the 50 mark and strictly heading towards 80.
