US dollar ended the week on negative territory against the Japanese yen on Friday, marking a second consecutive weekly loss, due to the release of a string of non-optimistic economic data out of the United States, which bolstered prospects that the Federal Reserve Bank will probably abstain from introducing a change to its monthly monetary stimulus at the upcoming policy meeting on October 29th-30th.
USD/JPY closed at 97.40 on trading Friday, gaining 0.12% for the day, while the weekly loss was 0.82%. Support for the pair is likely to be received at October 7th low, 96.66, while resistance is to be met at October 18th high, 98.16.
Among the crucial economic reports released out of the United States on Friday, that on durable goods orders revealed the indicator increased at the fastest pace in three months in September, as higher demand for commercial and military aircraft neutralized the drop in business equipment. Orders rose 3.7% in September, exceeding preliminary estimates of a 2.0% increase and following the revised up 0.2% gain registered in August. Durable goods orders excluding transportation equipment dipped 0.1% in September, following the revised 0.4% drop in August (0.1% drop previously), confounding expectations of a 0.5% gain. Durable goods orders excluding defense rose 3.2% in September in line with projections after the 0.6% climb a month ago.
Additionally, Thomson Reuters in cooperation with the University of Michigan reported that the final value of the index of consumer confidence in the United States slowed down during late October, reaching 73.2 and also marking its lowest level since December 2012. The final reading of the index in September was 77.5. Analysts had projected that this indicator will remain almost without a change in October in comparison with the preliminary value of 75.2.
On Thursday it became clear that US manufacturing activity increased at the slowest pace during the past one year in October, as factory output contracted for the first time since the fall of 2009. Markit Economics said, that the preliminary value of the manufacturing PMI decreased to 51.1 in October, reaching its lowest level since October 2012, as in September the PMI stood at 52.8.
On Tuesday the Department of Labor reported that US private sector added fewer than projected job positions in September, even before the triggering of the partial government shutdown, which lasted 16 days. Economy added 148 000 jobs in September, while projections pointed 180 000 new jobs.
All these data points boosted the case that the Federal Reserve will probably put off its plans to taper stimulus at its meeting this month. Projections also appeared that a possible scale back may occur no sooner than March next year.
During the upcoming week, marketsfocus will be set namely on the outcome of Feds policy meeting, as it is expected that the bank will maintain the current pace of its bond purchases.
On the other hand, Bank of Japans statement on policy on Thursday is also expected to cause significant influence upon the USD/JPY pair.
The week is expected to be rich in crucial economic data, coming out from both the United States and Japan.
On Monday (October 28th) the United States will release reports on industrial production, capacity utilization rate and pending home sales for September.
On Tuesday (October 29th) Japan will publish reports on household spending, unemployment rate and retail sales for September. The United States will show data on the index of producer prices, retail sales, the index of home prices in 20 large cities, followed by a report on consumer confidence for October by the Conference Board.
On Wednesday (October 30th) Japan is expected to release a report on industrial production for September. On the other hand, the United States will release the ADP report on the non-farm payrolls for October, followed by the index of consumer prices for September. Later in the day the Federal Open Market Committee (FOMC) will announce its interest rate decision and publish a rate statement, followed by a press conference with the central banks Chairman Ben Bernanke, during which high market volatility may be present.
On Thursday (October 31st) Bank of Japan will announce its base interest rate decision, accompanied by a statement on monetary policy. A press conference is scheduled after the rate announcement. At the same time, Japan will reveal data on the average labor cash earnings and housing starts for September. The United States will release its weekly report on initial jobless claims, followed by the manufacturing activity index for Chicago region in October.
On Friday (November 1st) the Institute of Supply Management (ISM) will show a report on activity in the sector of manufacturing in the United States.