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Global risk aversion pushed the low-yielding yen higher across the board last week. Which catalysts can affect the safe-haven this week?

Lower-tier economic releases

TBH, there’s not a lot in terms of economic data. You could probably get a pip or two from the lower-tier reports, though!

Tomorrow at 5:00 am GMT the BOJ will print its core CPI report that’s expected to print at 0.3% after June’s 0.4% uptick.

The consumer confidence data (43.4 expected, 43.5 previous) is next on Wednesday at 5:00 am GMT, followed by the retail sales numbers (1.3% expected, 1.7% previous) at 11:50 pm GMT.

The last bit is a data dump on Thursday’s Asian session trading when we’ll see Tokyo’s core CPI (expected to remain at 0.8%), unemployment rate (no change expected from 2.4%) and the preliminary industrial production (0.3% expected, -1.8% previous)

The industrial production report will probably have the most impact since it will give clues on how affected (or vulnerable) Japan’s manufacturing industry is from the current and future trade conflicts with China and the U.S.

Overall risk sentiment

As you can see, the yen has been taking cues from global bond yields lately. This week pay attention to any headline that points to escalating trade tensions between the U.S. and China.

Brexit could also take over headlines this week as Theresa May prepares to host a Cabinet crisis summit over the issue in mid-September.

Of course, the euro zone is also not out of the woods just yet with concerns over Italian banks just waiting to pop out at the most inconvenient opportunities.

Last but not the least is a possible profit-taking. With the yen climbing so quickly last week, traders could take advantage of the lack of top-tier releases to take on some higher-yielding bets.

Last Week’s Price Review

The yen was one of the biggest winners last week, but it’s currently THE biggest loser this week (as of 8 am GMT), which also means that the yen’s two week winning streak may soon come to an end.

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

The yen actually had a promising start, thanks to falling bond yields. Risk-taking was the name of the game on Monday, however, so the safe-haven yen wasn’t able to track bond yields too closely.

Risk-taking persisted on Tuesday and unfortunately for the yen, bond yields began to turn higher, and so the yen was forced to return its earlier gains and beat a hasty retreat.

Bond yields were tilting to the downside by Wednesday, but the yen continued to weaken against its peers, likely because appetite for risk just won’t go away.

Risk aversion finally returned on Thursday but bond yields began to tilt higher, so the yen’s price action became a bit more mixed. Most JPY pairs stayed below last week’s closing prices (dashed horizontal line), though, so the yen is headed for a disappointing loss this week.