USD/JPY RECLAIMS THREE-WEEKS HIGH AT 115.90 ON POOR GDP NUMBERS

• USD/JPY has recaptured 115.90 after Japan’s GDP delivered a poor show.
• The risk-on impulse is favoring equities but volatile currencies are still vulnerable.
• Major events this week: US CPI, US Initial Jobless Claims, Japan Overall Household Spending.

The USD/JPY pair has witnessed a juggernaut rally from March 4 low at 114.65 and has managed to reclaim its three-week-old resistance at 115.90. The pair has extended its rally after Japan’s Gross Domestic Product (GDP) numbers delivered a poor performance.

Japan’s quarterly GDP by the Cabinet Office came in at 1.1%, lower than the street estimates and previous print of 1.4% and 1.3% respectively, while the yearly GDP numbers slipped heavily to 4.6% from the market consensus of 5.6% and prior figure of 5.4%. This has underpinned the greenback against the Japanese yen.

On the geopolitical front, Ukraine President Volodymyr Zelenskyy has indicated some signs of truce after he confirmed a withdrawal of membership application for joining NATO. However, Ukraine’s intention of joining the European Union (EU) is still intact, which may keep Moscow from a ceasefire confirmation. Although the headline has managed to bring back some optimism in the equities, the risk-sensitive currencies are still underperforming against the mighty greenback.

Meanwhile, the US dollar index (DXY) has continued to oscillate in a tight range of 98.99-99.14 in the Asian session. A lackluster performance from the DXY is highly expected as the market participants are uncertain over Thursday’s US Consumer Price Index (CPI) numbers.

As per the market consensus, the US CPI is likely to print at 7.9% against the prior record of 7.8%. In addition to US inflation numbers, investors will also focus on US Initial Jobless Claims and Japan’s Overall Household Spending data, which are due on Thursday.