USD/JPY Daily Fundamental Analysis for August 16, 2011

The USD/JPY pair started the week with low trading volume, while the Japanese yen retreated against most of its major counterparts as the Japanese second quarter GDP came better than estimated, increasing demand for riskier assets.

The Japanese economy contracted by 0.3% during the second quarter better than expected, where domestic demand and the recovery efforts from the Japanese government and the BOJ helped the economy to ease the contraction affected by the March Tohoku Earthquakes.

On the other hand, the Japanese currency retreated against other majors after the Japanese Finance Minister declared that the government is monitoring the yen’s movements, and another intervention in the FX market could be witnessed.

On Tuesday, the U.S. economy will release the import price index for July, where the previous reading was – 0.5% and expected to come at –0.1%, while the annual import price index for July is expected to come at 13.4% from the previous 13.6%.

The U.S. housing starts index for July will be up released at 12:30 GMT, where it had a previous reading of 629 thousand and expected to come at 608 thousand down by 3.3%.

As for the building permits for July it will be up at 12:30 GMT, where it’s expected at 605 thousand down by 1.9% from the previous 624 thousand.

On the other hand, the industrial production for July will be published at 13:15 GMT, where it had a previous reading of 0.2% and expected to come at 0.5%. The capacity utilization for July is expected to come at 76.9% from the previous reading of 76.7%.