US dollar registered a retreat against the Japanese yen on Wednesday, as market players remained wary ahead of FEDs statement on monetary policy later today.
USD/JPY hit a session low at 97.76 at 6:10 GMT, after which consolidation followed at 97.95, down by 0.08% for the day. Support was expected at June 26th low, 97.24, while resistance was to be encountered at July 26th high, 99.36.
Markets were edgy, because recent economic data from the United States boosted uncertainty over the future of the Federal Reserves Quantitative Easing. On Tuesday the Conference Board said that consumer confidence in the United States declined to 80.3 in July from 82.1 during the preceding month, while projections pointed that the indicator will record a lesser drop to a reading of 81.4. Another report by Standard & Poor’s and Case-Shiller said that the composite index of home prices advanced by 12.2% in the month of May on annual basis, slightly below the expected 12.4% rise. In April data showed a 12.1% advance.
“We are looking for the FOMC to formalize a version of the guidelines for tapering QE laid out by Chairman Ben Bernanke,” Julia Coronado, chief economist for North America at BNP Paribas in New York, wrote in a research note, cited by Bloomberg. “The statement will probably say that the committee expects to begin trimming the purchases later this year; that the reduction will come in “measured steps” if the economy continues to improve and inflation rises closer to the Fed’s target; and that the program will end when unemployment is around 7 percent”, she added.
Meanwhile, earlier today it was reported that Japanese manufacturing sector expanded at a slower rate in July, but still remaining in the zone, pointing developing activity. Markit research group stated that manufacturing PMI in Japan dropped to 50.7 in July from 52.3 in June, but above the 50.0 level, which separates contraction from expansion. The composite indexes, gauging export orders and general orders increased in July for the fifth consecutive month. Another report showed Labor Cash Earnings in Japan rose by 0.1% in June on annual basis in line with expectations, after this indicator recorded a drop by 0.1% a month ago.
Elsewhere, the yen was trading with stability against the euro, as EUR/JPY cross dipped a mere 0.05% to 129.98 at 7:58 GMT. On the other hand, GBP/JPY pair erased 0.26%, trading at 149.03 at 7:59 GMT.
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