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Bond yields dictated the yen’s price action last week. Does this mean we should pay more attention to overall risk sentiment? Here are potential catalysts you should watch out for.

Mid-tier economic reports

While they don’t usually dictate the yen’s price action for long, economic reports like the preliminary machine tools orders (Mon, 6:00 am GMT), preliminary GDP (Tues, 11:50 pm GMT), revised industrial production (Wed, 4:30 am GMT), and core machinery orders (Wed, 11:50 pm GMT) could get reaction from yen bulls or bears if they show enough upside or downside surprise.

Overall risk sentiment

As you can see below, general risk-taking dragged the yen near the bottom of the forex heap last week.

This week pay close attention to how the markets react to any developments regarding Iran’s nuclear deal as well as any (positive?) news about the upcoming meeting between Donald Trump and Kim Jong Un.

Watch out for any headlines that could mean increased geopolitical conflicts, as it could mean increased (or decreased) demand for low-yielding currencies like the yen!

Last Week’s Price Review

The yen is the third worst-performing currency of the week (as of 8 am GMT). However, the trading week is not over yet, so the yen’s ranking could still improve since the yen only barely lost out to the Swissy.

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

And as usual, the yen’s price action was dictated mainly by bond yields. Although risk sentiment also had a role to play.

Bond yields rose on Tuesday, for example, but the yen either grudgingly lost ground or took ground from its peers. And that was likely because of the risk-off vibes at the time due to the political troubles in Italy and uncertainty surrounding Trump’s announcement that he was leaving the Iran Deal.

Risk sentiment is also the likely reason why yen pairs didn’t track the slide in bond yields too closely on Thursday since risk-taking was the prevalent sentiment at the time, especially after U.S. CPI failed to impress.