- This week, USD/JPY is expected to lose further ground.
With increasing Covid cases globally, the US currency gained ground this week.
According to the July FOMC minutes, the present QE program will be tapered by the end of 2012.
Perceived consumer sentiment in the US is deteriorating.
The duo may technically fall farther.
Despite the worldwide strength of the US dollar, the weekly USD/JPY prediction is negative.
A net gain of 17 pips was made by the USD/JPY throughout the week.
That the Fed outlined conditions for its long-awaited bond reduction on July 28 boosted the currency this week. Anecdotal evidence suggests that the US economy is slowing.
Japan's economy showed no indications of slowing, and the data matched forecasts. June was an excellent month for industrial output. Highlights from July's import and export data Imports and exports were both lower than anticipated, although being higher than previous year. Both imply a weakening economy. The national CPI showed negative results in all categories in July, while June's figures were revised down significantly from June.
July's CPI was positive for the second consecutive month after eight straight months of decreasing prices and base rates.
Retail sales fell in July after a significant decrease in consumer confidence in August, indicating that consumer sentiment may be affecting spending. Industrial output and capacity utilization surpassed forecasts despite the poor economy. The number of first unemployment assistance applications also fell to a new epidemic low. Despite the robust economic recovery, US consumers remained cautious.Daily chart of USD/JPY shows a broad down bar followed by gains. The 50-day SMA limit gains. The price closed below the 20-day SMA last week, a bearish indication. In both cases, the spread was narrower and the volume was lower than usual. This scenario predicts a new bearish wave. Only a prolonged rally over 110.40 may reverse the trend.
COVID Fears Globally
- As the currency strengthens, Covid-19 Delta instances have risen in several US states and abroad. No new limits from most nations, but fears of slowing growth kept oil prices low all week.
- This month's prediction is 52.1, which is somewhat lower than last month's reading of 53.0. Surprising data may lead to a USD/JPY decline.
- Core CPI y/y: Tuesday will see the publication of core inflation excluding food and energy.
- July's estimate is unchanged at 0.1 percent. No significant deviation is anticipated.
- This is the year-on-year change in Tokyo's core CPI excluding fresh food.
July's forecast is 0.1 percent, down from 0.1 percent before.
- Gross Domestic Product (GDP) Q/Q: The figure is projected to increase to 6.6% from 6.5 percent last quarter. Positive data increases the likelihood of tapering/rate rises.
- Weekly jobless claims: The previous week's figure of 348k is expected to drop to 345k this week.
An measure of US inflation and economic health, the Core PCE price index (m/m) is widely watched. In the prior reading, the dollar fell. July's reading is projected to drop to 0.3. However, any positive surprises may help boost the Greenback's strength.
In his remarks, Fed Chair Powell hinted at tapering and rate increases.
Jackson Hole Symposium (26-28 Aug) Next week's most significant release is a three-day affair. The Fed is expected to announce its tapering strategy during the conference.
