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Forex - USD/JPY weekly outlook: January 27 - 31

Published 01/26/2014, 06:21 AM
Updated 01/26/2014, 06:21 AM - The yen rose to seven-week highs against the dollar on Friday as weak Chinese manufacturing data and a selloff in emerging markets bolstered investor demand for the traditional safe-haven yen.

USD/JPY fell to 102.00, the weakest since December 6 and was last down 0.91% at 102.33. For the week, the pair lost 1.83%.

The pair is likely to find support at 101.20 and resistance at 103.57, Friday’s high.

Market sentiment was hit by concerns over a slowdown in China after data on Thursday showed that the preliminary reading of the HSBC manufacturing index fell to a six-month low in January.

A selloff in emerging markets accelerated on Friday, after the Turkish lira fell to the latest in a series of record lows against the dollar, when a currency market intervention by Turkey’s central bank failed to halt the currency’s steep decline. South Africa’s rand, the Russian ruble and the Argentine peso fell to multi-year lows against the dollar.

Argentina's central bank said Friday it was loosening strict foreign exchange rules, giving up its traditional policy of supporting the currency through interventions.

Emerging market currencies have been hard hit since the Federal Reserve announced plans last month to begin scaling back its asset purchase program. Recent indications that the global economic recovery is deepening has fuelled expectations that some central banks may move to tighten monetary policy this year.

Bank of Japan Governor Haruhiko Kuroda said Friday the country’s economy is making significant progress after the bank unveiled a huge stimulus program last April, but added that there was still some way to go before policy would be normalized.

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The euro was also sharply lower against the yen on Friday, with EUR/JPY down 1.05% to a six-week low of 139.97 at the close.

In the week ahead, Wednesday’s outcome of the Federal Reserve’s monthly meeting will be in focus amid expectations for a reduction to USD65 billion from the current USD75 billion in the bank’s stimulus program.

Data from the U.S. on fourth quarter growth will also be closely watched.

Ahead of the coming week, has compiled a list of these and other significant events likely to affect the markets.

Monday, January 27

The BoJ is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective. Japan is also to release data on the trade balance, the difference in value between imports and exports.

The U.S. is to produce data on new home sales, a leading indicator of demand in the housing sector.

Tuesday, January 28

The U.S. is to release data on durable goods orders, a leading indicator of production, as well as what will be a closely watch report on consumer confidence.

Wednesday, January 29

The Federal Reserve is to announce its federal funds rate and publish its rate statement.

Thursday, January 30

Japan is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

The U.S. is to publish preliminary data on fourth quarter economic growth. The nation is also to release the weekly report on initial jobless claims and data on pending home sales.

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Friday, January 31

Japan is to release a series of data, including reports on household spending, inflation, and industrial production.

The U.S. is to round up the week with a report on manufacturing activity in the Chicago region, revised data on consumer sentiment and a report on personal spending.

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