Forexpros – Last week saw the U.S. dollar advance against the yen, after Japanese authorities intervened in currency markets to curb the yen’s sharp gains, while concerns over the global economic outlook helped limit losses.
USD/JPY hit 80.23 on Thursday, the highest since July 12; the pair subsequently consolidated at 78.41 by close of trade on Friday, plunging 2.15% over the week.
The pair is likely to find support at 76.77, last Wednesday’s low and resistance at 80.23, Thursday’s high and a three-week high.
Japanese Finance Minister Yoshihiko Noda said Thursday that Japan intervened to curb the yen’s gains for the first time since March, sending the yen sharply lower against all major currencies.
In addition, the Bank of Japan announced additional monetary easing to further bolster growth, pledging to buy more assets such as stocks and bonds.
Mr. Noda reiterated his stance on Friday, saying that he was closely watching yen moves, while Vice Finance Minister Fumihiko Igarashi said that further intervention would “maintain the effect and warn those who make unusual moves” in the currency market.
Meanwhile, the U.S. Department of Labor said on Friday that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month’s figure was revised up to a gain of 46,000 from a previously reported 18,000.
The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.
The better-than-expected jobs data failed to ease fears that the U.S. economic recovery was stalling, after a flurry of weak data earlier in the week fuelled concerns over a possible double-dip recession.
The greenback fell close to a record low against the yen on Monday as fears over the global economic outlook and concerns over U.S. debt ceiling negotiations boosted safe haven demand.
After markets closed Friday, ratings agency Standard and Poor’s downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”
In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade.
Traders will also be paying close attention to Tuesday’s Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, August 8
Japan is to publish a flurry of data, with reports on the country’s current account, bank lending as well as an index of economic sentiment.
Tuesday, August 9
The Bank of Japan is to release the minutes of its most recent policy meeting. The minutes give an in-depth insight into the economic conditions that influenced the interest rate decision.
The country is also to publish government data on M2 money stock, household confidence and machine tool orders.
Meanwhile, the U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.
In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank’s rate statement, which gives important insights into the economic conditions that influenced the rate decision.
Wednesday, August 10
Japan is to publish official data on tertiary industry activity, a leading indicator of economic health.
Later in the day, the U.S. is to release a government report on the federal budget balance as well as data on crude oil stockpiles and wholesale inventories.
Thursday, August 11
Japan is to publish a report on core machinery orders, a leading indicator of production.
Meanwhile, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.
Friday, August 12
Japan is to release revised data on industrial production, a leading indicator of economic health.
The U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.
Forexpros
