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The yen’s price action last week was all about bond yields and overall risk sentiment. Think the low-yielding currency will be moved by other catalysts this week?

Inflation reports

Japan’s positive trade balance report failed to support the yen earlier today, but that doesn’t mean the currency won’t react to this week’ inflation reports.

BOJ’s core CPI will come out on Tuesday at 5:00 am GMT and market players see it growing by 0.6% after rising by 0.7% in March.

Then, Tokyo will publish its May core inflation numbers on Thursday at 11:30 pm GMT. Like the BOJ’s core CPI, it’s also expected to come in at 0.6%.

As late as last Friday Japan’s core-core CPI came in at 0.7% from a year earlier in April. This is a loooong way from the BOJ’s 2.0% target, so a couple of yen bears attacked.

Weak consumer price numbers could further weigh on the yen (or at least make it easier for the bears to extend their parties), so make sure you stick around to see how the reports play out.

Overall risk sentiment

As you can see below, the yen mostly took its cues from risk sentiment for most of the week.

This week pay close attention to headlines over Trump’s June meeting with North Korea’s Kim Jong Un; how other major global superpowers react to Iran’s additional sanctions, and progress over Uncle Sam’s trade plans with its NAFTA neighbors and China.

Last Week’s Price Review

The yen followed up last week’s poor performance with an even poorer performance since the yen is currently the biggest loser of the week (as of 8 am GMT).

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 like always, the yen was taking directional cues mainly from bond yields. And since bond yields were on the up and up, the yen found itself getting stomped.

Also as always, risk sentiment helped to dictate the yen’s price action. A clear example of this happened on Monday and Tuesday when bond yields rose but the yen only grudgingly weakened against its peers and even managed to gain some ground before retreating on Tuesday.

And this was likely because of the prevalence of risk aversion on Monday and on Tuesday,

Wednesday is also another example when risk sentiment caused yen pairs to temporarily decouple from the rise in bond yields since risk aversion was also the dominant sentiment, at least until Wednesday’s London session.