Forexpros – Last week saw the U.S. dollar stumble to a four-month low against the yen mid-week, before paring losses, after Japan’s Finance Minister said the yen’s strength did not reflect economic fundamentals, fanning speculation that Japan would intervene to stem the currency’s gains.
USD/JPY hit 78.45 on Thursday, the pair’s lowest since March 17; the pair subsequently consolidated at 79.12 by close of trade on Friday, tumbling 1.75% over the week.
The pair is likely to find short-term support at 78.45, Thursday’s low and a four-month low and resistance at 80.36, the high of July 12.
Japanese Finance Minister Yoshihiko Noda said on Thursday that the yen’s “movement doesn’t reflect fundamentals and has been one sided,” regarding the yen’s recent surge.
“It would be troublesome if it persists, and I will continue to closely watch markets,” Noda added, while making no comment about possible intervention in the financial markets.
Japan’s Chief Cabinet Secretary Yukio Edano echoed Noda’s comments, saying that he was also closely watching currency moves and that rapid foreign exchange moves were not “desirable.”
The greenback was weighed after ratings agency Standard & Poor’s said late Thursday that the U.S. faced a 50% chance of a credit rating downgrade within the next 90 days, citing the political debate over raising the country’s USD14.3 trillion debt ceiling before the August 2 deadline.
The warning came a day after rival Moody’s Investors Service said it put the U.S. government’s Aaa bond rating on review for possible downgrade due to a “small but rising risk” of a short-lived default.
Meanwhile, Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that the central bank was examining several untested means to stimulate growth if conditions deteriorate, including another round of asset purchases or quantitative easing.
However, in the second part of his congressional testimony on Thursday Bernanke said that that inflation was “higher” and “closer” to the central bank’s informal target than was the case in August 2010, damping speculation the Fed will take additional action to spur the economy.
In the week ahead, Japan is to publish official data on its trade balance, while markets will be paying close attention to any developments in regards to the U.S. debt ceiling talks as well as a congressional testimony from Fed Chairman Ben Bernanke.
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 Friday, as there are no relevant events on this day.
Monday, July 18
Markets in Japan are to remain closed for a public holiday.
The U.S. is to publish a government report on the balance of domestic and foreign investments.
Tuesday, July 19
The U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts.
Wednesday, July 20
The U.S. is to publish an industry report on existing home sales, a leading indicator of economic health, as well as government data on crude oil inventories.
Thursday, July 21
Japan is to publish official data on its trade balance, the difference in value between imported and exported goods and services over the month.
Later in the day, the U.S. is to release a weekly government report on initial jobless claims, while the Federal Reserve Bank of Philadelphia is to produce a report on manufacturing activity, a leading indicator of economic health.
In addition, Fed Chairman Bernanke is to testify on the Dodd Frank Act Anniversary, in Washington DC.
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