Japanese Yen weakens despite strong Japanese GDP

• Japan's Q1 GDP was reported at 0.5% QoQ and 1.8% annualized, indicating stronger-than-expected economic growth.
• JPY received modest support from the GDP revision, though expectations for aggressive BoJ tightening remain limited.
• Investors are focused on upcoming US inflation data.

The USD/JPY pair is trading slightly higher on Tuesday as investors digest stronger Japanese growth figures while maintaining a cautious stance ahead of key United States (US) inflation data. The gopher trades near the 160.30 price zone at the time of writing.

Japan's final Q1 Gross Domestic Product (GDP) expanded 0.5% QoQ, beating expectations of 0.3% and matching the previous estimate. Annualized GDP growth also surprised to the upside at 1.8%, above the 1.3% consensus forecast and signaling stronger economic momentum than markets had anticipated.

However, the Japanese Yen (JPY) found limited support amid stronger growth figures, as the GDP Deflator held at 3.2%, below expectations of 3.4%, suggesting underlying price pressure may be moderating despite the economy's resilience.

The Yen's gains remained limited as markets continue to question how aggressively the Bank of Japan (BoJ) can tighten policy amid uneven domestic demand and lingering global growth concerns.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 160.30, maintaining a bullish near-term tone as it holds above the 20-period Simple Moving Average (SMA) at 160.13 and the 100-period SMA at 159.47. The cluster of nearby supports reinforces the constructive structure, while the Relative Strength Index (RSI) hovering just below 60 suggests firm but not overextended upside momentum as the pair presses against immediate overhead barriers.

On the topside, initial resistance is aligned at the recent horizontal cap near 160.31, where a clear break would open the way for further gains in the short term. On the downside, first support emerges at 160.22, followed by 160.15 and the 20-period SMA around 160.13, with a deeper floor at 160.06 before the broader bullish base provided by the 100-period SMA near 159.47 comes into play.

(The technical analysis of this story was written with the help of an AI tool.)