• USD/JPY rose for the first time in three days after stronger-than-expected Japan GDP.
  • Japan’s Q1 GDP recovered from -1.2% forecast to -1.0%.
  • Risk catalysts trouble traders but USD weakness favors the sellers.
  • US trade numbers, risk-related headlines become the key for fresh impulse.

USD/JPY picks up bids to 109.30 during the sluggish hour of Tokyo open on Tuesday. The pair recently bounced off intraday low following the promising Q1 GDP figures from Japan. Also supporting the pair sellers is the US dollar’s corrective pullback and cautious optimsim ahead of the key Thursday.

The final reading of Japan’s Q1 GDP recovered from 1.2% forecast to 1.0% QoQ, as well as -3.9% compared to -4.8% market consensus on the annualized basis. It’s worth noting that the receding fears of further economic hardships, despite the coronavirus (COVID-19)-led emergencies in major prefectures, favor the Japanese yen (JPY) of late.

It’s worth noting that the government announcement to extend Tokyo’s emergency for another two weeks and a meager 3-4% vaccinations also put a safe-haven bid under the JPY.

On the contrary, weighing on the USD/JPY prices, could be the fears over the Fed’s next moves ahead of this Thursday’s US Consumer Price Index (CPI) release. On the same lines could be the mixed comments from US Treasury Secretary Janet Yellen and Friday’s US jobs report. The Western tussles with China and doubts over unlock in the key developed countries, including the UK, add to the risk-off mood and drag the pair southwards for the third consecutive day.

Amid these plays, the US 10-year Treasury yields remain sluggish around 1.56% and the US dollar index (DXY) remains depressed for the third day in a row, which in turn favors USD/JPY sellers due to the pair’s safe-haven status.

Furthermore, Japan’s upbeat Leading Economic Index for April, 103.00 versus 102.90 expected, joined recently weaker US statistics to offer an additional help to brighten the market sentiment and USD/JPY.

Looking forward, risk headlines will be the key amid a quiet session. US Goods and Services Trade Balance for April, expected -69 B versus -74.4 B prior, could offer intermediate direction to the pair.

Technical analysis

Although a clear downside break of 109.30 horizontal line directs USD/JPY prices towards a six-week-old rising support line near 109.00, 50-day SMA level of 109.18 offers immediate support to the quote.