Forexpros – The U.S. dollar slid against the yen on Friday, trimming some of the week’s gains as renewed fears over the handling of the debt crisis in the euro zone supported demand for the safe haven yen.
USD/JPY hit 78.21 on Friday, the pair’s highest since November 29; the pair subsequently consolidated at 78.06 by close of trade on Friday, gaining 0.38% over the week.
The pair is likely to find support at 77.91, the low of December 14 and resistance at 78.27, the high of November 29.
Trading volumes were thin ahead of the Christmas holiday weekend, resulting in quiet trade.
Market sentiment weakened on Friday amid sustained worries over potential mass downgrades in the euro zone and the region’s financial woes, despite official data showing that U.S. home sales rose more-than-expected in November, climbing to 315,000, exceeding expectations for a rise to 313,000.
The report came after data showing that U.S. core durable goods orders also rose-more-than-expected last month, advancing 3.8% from 0.0% in October.
The greenback rose to a two-day high against the yen on Wednesday, after an unprecedented EUR489.19 billion three-year loan by the European Central Bank.
Markets were hoping the move would avoid a credit crunch in the euro zone and help increase bond purchases of indebted euro zone countries. But the heavy demand from 523 European lenders underlined concerns over the scale of the financial crisis in the single currency bloc.
Meanwhile, the Bank of Japan left its benchmark interest rate unchanged close to zero, but cut its view on the economy from November on mounting evidence of the effects of the euro zone’s debt crisis on global growth and Japan’s recovery prospects.
The dollar extended gains on Thursday amid mixed U.S. data. A report by the University of Michigan’s said its index of overall consumer sentiment rose to 69.9 in December, exceeding expectations for a rise to 68.2.
A separate report showed that the number of people who filed for unemployment assistance in the U.S. last week fell unexpectedly to the lowest level since April 2008, dropping to 364,000.
The data came after the Bureau of Economic Analysis said gross domestic product increased at a seasonally adjusted annual rate of 1.8% during the third quarter, down from a previous estimate of 2.0%.
The data primarily reflected a downward revision to personal consumption, which grew 1.6% compared to a previous estimate of 2.3%. Consumer spending typically accounts for nearly 70% of U.S. economic growth.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales, while the Bank of Japan is to publish the minutes of its most recent monetary policy meeting.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 26
Markets in the U.S. will be remaining closed for the Boxing Day holiday.
Tuesday, December 27
The BOJ is to publish the minutes of its most recent monetary policy meeting, which contain important insights into current economic conditions from the bank’s point of view. Japan is also to publish official data on housing starts.
Later Tuesday, the U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on consumer confidence and manufacturing activity in Richmond.
Wednesday, December 28
Japan is to publish a flurry of data, with government reports on household spending, inflation, unemployment, manufacturing and retail sales, the leading indicator of consumer spending, which accounts for the majority of economic activity.
The U.S. is to release the treasury currency report.
Thursday, December 29
The U.S. is to publish its weekly government report on initial jobless claims, as well as industry data on pending home sales, a leading indicator of economic health. The U.S. is also to release official data on crude oil stockpiles and industry data on business conditions in the Chicago area, a leading indicator of economic health.
Friday, December 30
Japan is to release preliminary data on industrial production, a leading indicator of economic health.
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