Improved risk sentiment and a dovish BOJ kept pressure on the yen last week. Will the tides change for the safe haven this week?
Here are catalysts you need to watch out for:
BOJ’s policy decision (Jan 21, Asian session)
- The Bank of Japan (BOJ) will release its monthly interest rates and quarterly outlook. Governor Kuroda will also conduct a presser shortly after the statements are published
- No policy changes are expected for BOJ’s interest rates, asset purchases, and forward guidance though Kuroda could repeat threats of further stimulus
- BOJ is expected to upgrade its economic forecasts
Mid-tier economic data
- Markets are expecting Japan’s trade deficit (Jan 22, 11:50 pm GMT) to widen from 85.2B JPY to 161B JPY in December
- National CPI (Jan 23, 11:30 pm GMT) could accelerate from 0.5% to 0.7% from a year ago in December
- Manufacturing and services PMIs (Jan 24, 12:30 am GMT) are expected to print slightly higher rates than their December readings
Overall risk sentiment
- No updates are expected from the U.S.-China deal, so traders will likely focus on top-tier economic releases
- Geopolitical tensions in Libya and Iraq could also affect overall risk-taking
- Keep an eye out for major market themes from this week’s World Economic Forum (WEF) in Davos
Technical snapshot
- Stochastic considers JPY as “oversold” against EUR, CAD, USD, and CHF
- CAD/JPY, NZD/JPY, and USD/JPY are trading above both their short and long-term SMAs on the daily time frame
- AUD/JPY, CHF/JPY, EUR/JPY, and GBP/JPY are only trading below their 5 SMAs
Missed last week’s price action? Read JPY’s price recap for January 13 – 17!
