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Political developments in the euro zone and overall risk-taking pushed the yen around last week. Will the low-yielding currency dictate its price direction this week?

Maybe not. As you can see in your forex calendars, Japan isn’t scheduled to print any top-tier reports this week.

And since the yen has been taking cues from bond yields and risk sentiment for weeks now, it’s a good bet that the yen’s safe haven appeal will once again come into play some time this week.

Trade war fears is a good theme to monitor especially now that the U.S. has pushed through with steel and aluminum tariffs on its major trading partners. In addition to that, the Trump administration is determined to place more tariffs on $50 billion worth of China’s products.

Escalations of trade tensions between the U.S. and its biggest partners will spook risk-takers, so watch out for any related headlines that could translate to volatility!

Meanwhile, political wheels are still spinning in the euro zone. Spain’s Rajoy got booted out after a no-confidence vote, while Italy just sworn in a new government with Giuseppe Conte as Prime Minister.

Last but not the least are top-tier reports from other major economies and their impact on interest rate expectations and bond yield movements. Watch out, fellas!

Last Week’s Price Review

The yen is mixed but a net loser (as of 8 am GMT). That doesn’t mean that the yen was just being pushed around by its peers, though, since yen pairs actually have somewhat uniform price action.

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, yen pairs were taking directional cues from bond yields. Although it’s also quite likely that risk sentiment was in play since bond yields fell during the first half of the week because of safe-haven demand for bonds, due to political uncertainty in Spain and Italy.

Bond yields began climbing (and the yen began to weaken) on Wednesday, though, thanks to positive political developments in Spain and Italy that finally revived appetite for risk.

Bond yields (and some yen pairs) had two-way price action on Thursday since risk-taking initially prevailed before risk aversion made a comeback during Thursday’s U.S. session, thanks mainly to renewed trade war fears after after U.S. Commerce Secretary Wilbur Ross announced that the U.S. will push through with its planned tariffs against the E.U., Canada, and Mexico.