USD/JPY slipped below 102 after having constructed a steady short-term uptrend over the past few weeks. The move back below 102 is quite significant and sees the prospect of key support in the 101.50 region being tested again.
On the data front, Japan’s Q1 GDP came in well ahead of expectations at 5.9% (versus an anticipated 4.2%) along with a big improvement in tertiary industry activity. Foreign buying of Japanese bonds has also picked up and all these factors combined have aided a yen strengthening today. BoJ Governor Kuroda was also on the wires with some encouraging comments about the economy post the sales tax hike. Kuroda said companies were doing well to pass on the tax to customers. This will ultimately contribute to consumer price inflation and would be positive for the inflation target. USD/JPY remains choppy and I feel the 102 level to the upside and 101.50 to the downside will be the two key levels to watch.
NZ budget in focus
At midday AEST we get New Zealand’s annual budget release which is tipped by analysts to be quite hawkish. In sharp contrast to our budget, the New Zealand government is likely to forecast a surplus for 2014 to 2015. Given the significant challenges the country was facing with an earthquake not too long ago, this is quite impressive. NZD/USD has been in a steady uptrend since February and the bulls will be looking to defend that in the near term. Should the budget come in quite hawkish then a break back above 0.87 could be on the cards.