Global macro overview for 17/05/2017:

The Preliminary GDP data from Japan might increase volatility of Yen pairs. The data are scheduled for release at 01:50 am tomorrow night and market participants expect an increase in GDP from 0.3% q/q to 0.4% q/q. This means the economy is expected to grow for a fifth consecutive quarter. If the forecasts are correct, the-better-than expected GDP will secure the view, that Japan is on a sustainable path of moderate growth amid the tailwinds like the global economic recovery and a weak Yen. This point of view is supported by the recent upbeat data from service and manufacturing sectors of the Japanese economy.

Let's now take a look at the USD/JPY technical picture on the H4 timeframe. The market is still in a corrective cycle and it is about to hit the 38% Fibo retracement of the latest swing up. The momentum indicators point to the downside, but the market conditions look oversold already, so the level of 112.06 might be the corrective cycle target for a reversal. However, if the data are worse than expected, then the market might break out below this level and head lower towards the next Fibo support at the level of 111.23.