Forex - USD/JPY weekly outlook: September 16 - 20

The dollar slipped lower against the yen on Friday as doubts over whether the Federal Reserve will start to roll back stimulus this month escalated following the release of disappointing U.S. economic data.

USD/JPY fell to session lows of 99.20, before settling at 99.36, 0.21% lower for the day and ending the week down 0.37%. 

The pair is likely to find support at 98.53, the low of September 6 and resistance at 99.97, Friday’s high.

The Commerce Department said U.S. retail sales rose 0.2% in in August, undershooting expectations for a 0.4% increase. The data added to concerns over the outlook for third quarter growth.

A separate report showed that the preliminary reading of the University of Michigan’s consumer sentiment index fell to a five month low of 76.8 in September, from a final reading of 82.1 in August.

The reports came a week after the latest U.S. employment report showed that the economy added slightly fewer jobs than expected in August.

The dollar weakened amid renewed uncertainty over whether the Fed will start to unwind its USD85 billion-a-month asset purchase program at its upcoming policy meeting on September 17-18. Fed Chairman Ben Bernanke has said that the decision to begin tapering will depend on whether economic data is strong enough.

In Japan, the government upgraded its view of the economy in its monthly economic report on Friday.  In its September report, the government said Japan is approaching an end to deflation and said the economy was beginning to recover at a “moderate” pace.

On Monday, revised data showed that Japan’s economy expanded by 0.9% in the second quarter, bringing the annualized rate of growth to 3.8%, compared with a preliminary reading of 2.6%. The initial estimate for quarter on quarter growth was 0.6%.

In the week ahead, investors will be keenly anticipating the outcome of the Fed’s policy-setting meeting on Wednesday, and a press conference with Fed chief Ben Bernanke will be closely watched. Meanwhile, Japan is to release data on the trade balance.

Ahead of the coming week, Investing.com 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, September 16

Markets in Japan are to remain closed for a national holiday. 

The U.S. is to publish the Empire state manufacturing index, in addition to data on industrial production and the capacity utilization rate.

Tuesday, September 17

The U.S. is to release data on consumer price inflation, which accounts for a majority of overall inflation.

Wednesday, September 18

The U.S. is to release official data on building permits, a leading indicator of future construction sector activity, as well as data on housing starts.

The Fed is to announce its federal funds rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. Chairman Ben Bernanke is to hold a press conference after the rate announcement. 

Thursday, September 19

Japan is to release data on the trade balance, the difference in value between imports and exports.

The U.S. is to release the weekly report on initial jobless claims, as well as the Philly Fed manufacturing index and data on existing home sales.