Forex - USD/JPY weekly outlook: May 20 - 24

Investing.com - The broadly stronger dollar rose above 103 per yen for the first time since October 20008 on Friday after data showed that U.S. consumer sentiment rose more than expected in May, climbing to an almost six year high.

USD/JPY hit session highs of 103.31, before settling at 103.19, rallying 0.90% and extending the week’s gains to 1.46%.

The pair is likely to find support at 102.07, Friday’s low and resistance at 104.00.

The University of Michigan said its consumer sentiment index jumped to 83.7 in May, its highest level since 2007, from 76.4 in the preceding month, outstripping expectations for a reading of 78.0.

A separate report by the Conference Board showed that its index of leading economic indicators rose 0.6% in April, more than double the 0.2% increase expected by economists.

The robust data bolstered expectations that the Federal Reserve could begin to scale back its USD85 billion a month asset purchase program this year.

The data came after a series of economic data releases on Thursday raised doubts over the strength of the U.S. economic recovery.

Official data showed that consumer price inflation and housing starts fell more-than-expected in April, while jobless claims posted the largest increase in six months.

In Japan, official data on Thursday showed that the economy expanded by 0.9% in the first quarter, outstripping expectations for 0.7% growth, bringing the annualized rate of growth to 3.5%.

The data indicated that Japan’s new monetary easing measures are bolstering consumer spending, while Japanese exports were boosted by the weaker yen.

The yen ended the week close to three-year lows against the euro, with EUR/JPY up 0.55% to close at 132.46, 0.31% higher for the week.

In the week ahead investors will be focusing on Wednesday’s Federal Reserve minutes, as well as testimony on the economic outlook and monetary policy by Fed Chairman Ben Bernanke. Markets will also be watching the outcome of Wednesday’s Bank of Japan policy meeting.

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 Monday and Tuesday as there are no relevant events on these days.

Wednesday, May 22

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

The Bank of Japan is to announce its benchmark interest rate. The announcement is to be accompanied by the bank’s monetary policy statement, which contains important insights into the economic outlook. The BoJ is to hold a press conference after the rate announcement.

The U.S. is to release data on existing home sales, a leading indicator of economic health, while the Federal Reserve is to publish the minutes of its most recent policy-setting meeting.

Meanwhile, Fed Chairman Ben Bernanke is to testify on the economy and monetary policy in Washington.

Thursday, May 23

The U.S. is to release the weekly government report on initial jobless claims and official data on new home sales, a leading indicator of economic health.

Friday, May 24

The U.S. is to round up the week with government data on durable goods orders, a leading indicator of production.