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Japan won’t be printing any top-tier economic report this week, so we’re taking a look at some reports that could influence risk sentiment.

China’s CPI and trade balance data

Last week the New Zealand dollar got boosts after China printed strong manufacturing and services PMIs. And with no economic release on tap save for the building consents due on Jan. 11 at 9:45 PM GMT, we might see Kiwi dance to the tune of China’s CPI (Jan 10, 1:20 AM GMT) and trade balance (Jan 12) reports.

China’s annual inflation is expected to grow by 1.9% after seeing a 1.7% growth in November. It’s also expected to show a trade surplus of $37.44B in December – a dip from November’s $40.21B figure – despite the holiday season. Take note that significant hits or misses could set the tone for NZD’s intraday trading.

U.S. FOMC VOTING member speeches

Last week the FOMC meeting minutes release saved the dollar from its intraweek losses. See, Yellen and her gang weren’t as dovish as expected since “a few participants” are considering a faster pace of tightening throughout 2018 than implied by their official December statement.

They were also pretty excited about Trump’s fiscal stimulus plan, saying that it could lead to “a steeper path of increases in the target range.” And no, they weren’t talking about golf.

This week we’ll hear from Fed members Raphael Bostic (Jan 8, 5:40 PM GMT), John Williams (Jan 8, 6:35 PM GMT), and William Dudley (Jan 11, 8:30 PM GMT). All three are voting members in 2018, so y’all better watch their speeches closely!

Chart to Watch: USD/JPY

USD/JPY Daily Forex Chart
USD/JPY Daily Forex Chart

As you can see, USD/JPY is trading inside what looks like a symmetrical triangle on the daily chart. However, zooming out of the chart a bit shows that a “breakout” could still keep the Greenback within a larger trading range.

An upside breakout could boost the pair all the way to the 114.50 area of interest, while a break lower could drag it back down to the 111.50 levels near the 100 and 200 SMAs.

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

As usual, yen pairs took a lot of directional cues from bond yields. However, the yen was also affected by risk sentiment. And since bond yields rose during the course of the week and since risk-taking was the dominant sentiment, it’s not surprising why the safe-haven yen had a tough time.

Interestingly enough, the yen actually had a promising start thanks to the risk-off vibes on Tuesday, which apparently allowed the yen to diverge from rising bond yields.

Risk-taking later made a comeback on Wednesday. And fortunately for the yen, bond yields fell on Wednesday because the European Union’s Markets in Financial Instrument Directive II (Mifid II) took effect on that day and market analysts said that investors were supposedly uncertain on how the new rules will affect the bond market.

Sadly for the yen, risk-taking persisted on Thursday, which caused bond yields to rise while also weakening the safe-haven yen. Talk about a double whammy!

And I can’t believe I’m writing this, but it’s also possible that the yen’s weakness on Thursday was due to rhetoric from the BOJ since bond yields fell later on Thursday when China announced new regulations to tighten bond trading. But as you can see on the overlay of inverted JPY pairs, the yen kept on weakening against its peers.

As for some specifics, BOJ Shogun Kuroda said that “Unlike snow, Japan’s deflationary mindset won’t melt easily.”

This is a very heavy hint that the BOJ thinks that inflation won’t be rising anytime soon, which means that the BOJ’s super loose monetary policy is here to stay. In fact, Kuroda did explicitly say in his speech that the BOJ will “patiently” maintain its very accommodative monetary policy stance.