Forexpros – The U.S. dollar ended the week lower against the yen on Friday, as an agreement on deeper economic integration in the euro zone failed to quell investors’ concerns over the handling of the region’s debt crisis.
USD/JPY hit 77.12 on December 8, the pair’s lowest since November 25; the pair subsequently consolidated at 77.61 on Friday, shedding 0.51% over the week.
The pair is likely to find support at 77.28, the low of November 30 and resistance at 78.07, the high of December 2.
European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.
U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.
Meanwhile, investors were cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market.
In the U.S., official data showed that the trade deficit narrowed to USD43.5 billion in November, in line with expectations, from a deficit of USD44.2 billion the previous month.
In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.
Meanwhile, government data showed that Japanese gross domestic product rose more-than-expected in the third quarter, climbing to 1.4%, from 1.5% in the preceding quarter and surpassing expectations for a 1.3% increase.
The greenback tumbled to a nine-day low against the yen on Thursday as European Central Bank President Mario Draghi quashed expectations that the central bank would step up its bond purchasing program once a political solution to the debt crisis reached.
But demand for the dollar strengthened after the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.
In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.
Italy and Spain are both set to auction government bonds in the coming week.
Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 12
Japan is to produce preliminary data on machine tool orders in addition to official data on household confidence and the corporate goods price index.
Also Monday, the U.S. is to publish official data on the federal budget balance.
Tuesday, December 13
Japan is to release official data on tertiary industry activity, a leading indicator of economic health.
Later Tuesday, the U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. In addition, the Federal Reserve is to announce its federal funds rate.
Wednesday, December 14
Japan is to release revised data on industrial production.
The U.S. is to produce official data on import prices and crude oil stockpiles.
Also Wednesday, the Organization of Petroleum Exporting Countries are to meet to discuss a range of issues regarding energy markets, including oil production levels.
Thursday, December 15
Japan is to publish official data on manufacturing and service sector activity, leading indicators of economic health.
The U.S. is to release a flurry of economic data, including the weekly report on initial jobless claims and data on producer price inflation. The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.
Friday, December 16
The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.
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