Risk-taking dragged on the yen across the board last week. Will the safe-haven regain some of its losses this week?
Here are a few potential catalysts:
Lower-tier economic releases
Earlier today we saw Japan’s current account report print better-than-expected results in May.
However, Bank of Japan (BOJ) Governor Kuroda also went under the spotlight to repeat that he and his team are committed to keeping their policies easy until they hit their inflation target. The mixed reports probably canceled each other out so that the yen barely reacted to the releases.
But that’s history. Over the next couple of days we’ll see the preliminary machine tool orders, core machinery orders, PPI, and the revised industrial production reports from Japan.
While they don’t usually cause sustained moves for the yen, we could see a bit of intraday price action if they do print significantly weaker or stronger numbers than their previous readings.
Keep them in mind when executing your yen trade setups!
Overall risk appetite
The yen took a whupping across the board when traders decided to take some risks. This week we’ll see a couple of central bank statements and speeches, so we might see a bit of volatility for the yen crosses.
And then there’s the teeny trade war issue. Now that we’ve started another trading quarter and the U.S. has finally pulled the trigger on its first batch of additional tariffs on Chinese goods, some investors and traders will adjust their positions depending on what they think will happen next.
Last Week’s Price Review
The yen was the second biggest loser last week, but it’s turning in a more mixed performance this week (as of 8 am GMT).
Looking at the overlay of inverted JPY pairs above, we can also see that yen pairs are still taking some directional cues from bond yields.
However, we can see also see that the yen’s price action was a bit messy, which implies that the yen was somewhat vulnerable to opposing currency price action.
Moreover, we can see that yen pairs briefly (but broadly) decoupled from bond yields at times.
And the clearest ones are (1) during Monday’s U.S. session when bond yields recovered but the yen continued to strengthen before eventually retreating and (2) during Thursday’s U.S. session when bond yields plunged but the yen had a hard time advancing.
We can probably attribute those instances of decoupling on risk sentiment since intense risk aversion was the dominant sentiment on Monday, while risk-taking was the name of the game on Thursday.