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The yen remained resilient despite an improvement in risk appetite. Will this week’s catalysts provide a clearer direction for the safe haven?

Japan’s data dump (Friday, Asian session)

The yen won’t have any major chance to dance to its own tune until Friday when Japan is scheduled to print a bunch of reports.

Tokyo’s core CPI (expected to remain at 0.8%) will be published at 11:30 pm on April 26 together with the unemployment rate (2.5% expected).

20 minutes later we’ll see Japan’s preliminary industrial production (0.5% expected, 2.0% previous) along with the annualized retail sales report (1.5% expected, 1.7% previous)

Since the BOJ will be publishing its monetary policy decision shortly after these reports, don’t expect a lot of reaction unless we see significant hits or misses.

BOJ’s policy decision (April 27, Asian session)

Last month the Bank of Japan (BOJ) kept its policies steady as markets had predicted. There was nothing new with the statement and the presser that followed didn’t contain any bombshells, so traders priced in Trump’s potential meeting with Kim Jong Un instead.

This week market players are expecting policies to remain unchanged for another month. Take note that the central bank will also release its outlook report AND conduct a presser in early London session.

With no other top-tier events scheduled around the time of the release, it’s likely that traders will price in whatever soundbite we get from Governor Kuroda and his team. Make sure you don’t miss the headlines!

Last Week’s Price Review

The yen is presently the third best-performing currency of the week (as of 8 am GMT). And if the yen maintains this ranking by the end of the week, then that will mark the yen’s first net positive performance after three straight weeks of yen-bashing.

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

Looking at the overlay of inverted JPY pairs and the yield of benchmark 10-year U.S. government bonds, it looks like yen pairs were tracking bond yields (like they normally do) from Monday until Tuesday.

However, yen pairs began showing signs of decoupling on Wednesday since bond yields were tilting to the upside but the yen showed resilience. And this became even more apparent come Thursday when the yen gained strength (except against USD) even as bond yields surged.

There were no direct catalysts for the yen, but it’s highly probable that the yen was supported by the fading risk-on vibes on Wednesday and risk aversion making a comeback on Thursday.

Yen pairs did appear to eventually resume tracking bond yields on Friday, though.