Forexpros – Last Friday saw the U.S. dollar pare losses against the yen, pulling back from a four-month low after the initial euphoria generated by an agreement on a second bailout for Greece faded, boosting the greenback.
USD/JPY hit 78.21 on Friday, the pair’s lowest since March 17; the pair subsequently consolidated at 78.52 by close of trade, still down 0.70% on the week.
The pair is likely to find support at 77.09, the low of March 17 and resistance at 79.31, the high of July 20.
On Thursday, euro zone leaders announced a new aid package for Greece worth EUR159 billion, with bondholders agreeing to contribute to the bailout. They also expanded the role of the European Financial Stability Facility to purchase bonds from indebted nations, assist troubled banks and offer credit lines.
But the greenback strengthened broadly on Friday as investors questioned whether the new aid deal for Greece was enough to stop the debt crisis from spreading to Italy and Spain.
On Wednesday, Japan’s Finance Minister Yoshihiko Noda said the yen’s gains were a reflection of concerns over sovereign debt in Europe and the U.S. more than a reflection of Japan’s economic fundamentals. He added that the government was ready to take decisive steps on currencies if needed to stem excessive or volatile moves.
Meanwhile, talks between U.S. President Barack Obama and Republicans aimed at raising the U.S. debt ceiling in order to avert a default broke down late Friday, amid disagreement over the role of taxes in any deficit reduction plan.
The U.S. will run out of funds to service its debt on August 2 if Congress does not approve additional borrowing. Ratings agency Standard & Poor’s said Thursday that there is a 50-50 chance that the triple-A credit rating of the U.S. could be cut within three months.
In the week ahead, as concerns over the sovereign debt crisis in the euro zone recede, investors will be focusing on U.S. efforts to agree on a USD3 trillion deficit-reduction plan. Markets will also be looking towards Friday’s data on U.S. second quarter gross domestic product, in order to gauge the strength of the U.S. economic recovery.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.
Tuesday, July 26
The U.S. is to publish government data on new home sales, a leading indicator of economic health, as well as data on consumer confidence and house price inflation.
Wednesday, July 27
The U.S. is to publish official data on durable goods orders, a leading indicator of production, as well as government data on crude oil stockpiles. Later in the day, the Federal Reserve is to publish its Beige Book, which contains data the bank looks at when making its next interest rate decision.
Thursday, July 28
Japan is to publish official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Later Thursday, the U.S. is to release government data on initial jobless claims, a leading indicator of economic health, as well as industry data on pending home sales.
Friday, July 29
Japan is to release a flurry of data with government reports on consumer price inflation, household spending, unemployment, manufacturing and housing starts, as well as preliminary data on industrial production, a leading indicator of economic health.
The U.S. is to round up the week with preliminary data on second quarter GDP, as well as a preliminary report on the GDP price index and an employment cost index. The U.S. is also to publish data on manufacturing activity in the Chicago area, while the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
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