TD Research discusses USD/JPY outlook in light of this week's release of Japan Q1 GDP report which showed a slowness in Japan's economy and adopts fading USD/JPY rallies strategically targeting a move towards 102 in 2H.
"Another notable reversal that markets are trying to sort through is the slide in Q1 Japanese GDP.
The retreat in Q1 marks the end of a roughly two-year streak without a negative print. Some are now questioning the JPY macro trade story as a slowdown in investment spending accounted for a decent chunk of the slip. We don't think this marks the end of the JPY bullish narrative, especially as growth is only part of the story...," TD argues.
"This backdrop alongside a steeply undervalued JPY leaves us fading rallies in USDJPY, expecting a push towards 102 in H2," TD advises.