Forexpros – The U.S. dollar tumbled to a four month low against the yen on Friday, as worse-than-expected data on second quarter U.S. growth and the absence of a deal on raising the U.S. debt ceiling bolstered safe haven demand.
USD/JPY hit 78.69 on Tuesday, the weekly high; the pair subsequently consolidated at 76.77 by close of trade on Friday, plunging 1.94% over the week.
The pair is likely to find short-term support at 76.12, the low of March 16 and the pair’s all-time low and resistance at 78.01, last Thursday’s high.
On Friday, the Commerce Department said that the U.S. economy grew at an annual rate of just 1.3% in the second quarter, falling short of expectations for growth of 1.7%. First quarter growth was revised sharply lower to 0.4%, down from 1.9%.
Meanwhile, with only days to go before an August 2 deadline to raise the U.S. debt ceiling, Congressional leaders and the White House had not reached a consensus that would avert a downgrade or default on the nation’s debt.
On Friday, U.S. President Barack Obama urged divided Republicans and Democrats to reach an agreement.
The yen’s steep gains have sparked concerns in Japan over the impact of the stronger yen on the country’s largely export based economy.
Japanese Finance Minister Yoshihiko Noda warned about the strong yen, saying he would consider how long Japan could ignore current exchange rate moves without acting.
But the yen remained supported against the greenback after Japan’s economy minister indicated intervention to weaken the yen was unlikely before the outcome of the U.S. deficit debate.
In the week ahead, the dollar looks likely to remain under pressure as investors await progress on a deal to raise the debt ceiling, while Friday’s non-farm payrolls will also be in focus.
Meanwhile, the Bank of Japan is to announce its benchmark interest rate on Friday.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, August 1
In the U.S., the Institute of Supply Management is to publish data on manufacturing activity.
Tuesday, August 2
Japan is to publish official data on average cash earnings, which is closely correlated with consumer spending.
Later in the day, the U.S. is to publish official data on personal consumption expenditures and personal spending, which is linked to consumer inflation.
Wednesday, August 3
In the U.S., payroll processing firm ADP is publish a report on non-farm payrolls, which leads government data by two days. In addition, the Institute of Supply Management is to publish data on service sector growth, a leading indicator of economic health. The U.S. is also to publish data on factory orders and crude oil inventories.
Thursday, August 4
The U.S. is to publish government data on initial jobless claims, a leading indicator of economic health.
Friday, August 5
The BoJ is to announce its benchmark interest rate. The announcement will be followed with a closely watched press conference to outline the factors affecting the decision.
The U.S. is to round up the week with government data on non-farm payrolls, as well as data on average hourly earnings and the unemployment rate.
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