USD/JPY: fresh high of 2013 is not far off | 13 December 2013

Review of the past week

The last week was the first trading week of the new month and thus had been very eventful. European currency managed to consolidate strongly against its US associate. EuCB meeting was conducted on December, 5th. As it was expected, European regulator remained discount and deposit rates without changes. Over the last days, there were rumors that negative rates would be introduced in Euro zone and the market received refutation of this information.

On this background, a confident growth of Eur/Usd quote has been witnessed, though provisional GDP for the 3rd quarter received good data. Friday's report on labor market sprang a surprise for market's participants, in particular, it was growth of Non-Farm payrolls index to the point of 203 000. Though European currency reacted this only in the form of technical correction, upon which growth of quotation continued. Also, a notable upsurge took place on leading stock exchanges of the world. To conclude, US positive data was not able to persuade investors that FRS would decide about cutting of QE3 on its nearest meeting on December, 17-18.

British currency had been descending during entire week. Positive data on construction and manufacture PMI did not encourage bulls to storm new hills. Whereas release of PMI for service sector disappointed investors having demonstrated its low for the last 5 months. Also, its rate was pressed by Eur/Gbp growth – this cross-rate consolidated a lot.

BoE meeting was held on Thursday, 5th, and it was decided to remain current monetary policy unchanged. Usd/Jpy had been experiencing correction over the most part of the week, after which it had reached a fresh 6-month's high. Positive data on the US labor market contributed to growth of the US currency. Usd/Jpy pair closed trading week on the point of 102.88. The futures on stock index Nikkei 225 also showed a confident growth further to three days of correction. Correlation between those two pairs is still very strong.

Forecast for the week 9  – 13 of December:

Euro/dollar:

This week will be less eventful than the previous one. No important releases are scheduled for Euro zone. Investors must pay attention to Tuesday and Thursday speeches by the EuCB President Mario Draghi as well as to the report on changes in industrial output. Weak data on changes in German manufacturing orders released the last week can be negative for the final release on European manufacturing.

On Thursday, 12, the report on changes in retail commerce will be published in the USA. Recent positive data on labor market and consumer sentiment index of Michigan university can greatly improve final release on retail commerce. We can expect the data to be above median line of forecasts that will be favorable for the US currency. In general, Eur/Usd quotes can get up to 1.38, whereas a more significant growth would require drivers which are absent now.

Pound/ dollar:

For participants of trades with Gbp/Usd pair, main events of the week include speech of BoE Governor Mark Carney on December, 9th and release on manufacturing scheduled for December, 10th. Positive news background can allow British currency to renew current year high, but one should not rely upon a strong growth. In general, we can expect a flat trend within the range 1.6200-1.6470.

 Dollar/Yen:

This week is very eventful in terms of publication macroeconomic stats from Japan. On Monday, final GDP will be published for 3rd quarter. According to Bloomberg economists, drop in the rate of 0.3% is expected, which will press Japanese currency.

On Wednesday, investors must pay attention to Oct Machinery Orders release. This index is anticipating. Positive data is very often dangerous for Yen and positive for stock market. Positive report on the US retails will add more optimism for bullish speculations and one can expect that Usd/Jpy pair will make a fresh high of 2013 year.