The yen had a mixed price action against its major counterparts last week. Will it have a chance at one-directional moves this week?
Let’s take a look at some potential catalysts:
Kuroda’s speech (Sept. 3, 5:40 am GMT)
In a few hours Bank of Japan (BOJ) Governor Kuroda will give a speech commemorating the anniversary of stock index futures trading in Tokyo.
While we’re not expecting fireworks from the BOJ head honcho, it would be interesting to see if he continues to reassure markets that he and his team will continue to stimulate the markets. Not only that, but it would also be interesting to see how the markets will react (if at all) to his speeches.
Average cash earnings (Sept. 7, 12:00 am GMT)
Lower-tier reports like these don’t usually affect the yen’s price action for long, but since it would be preceded by a household spending report during the same trading session, we might see the yen move a pip or two during the release.
Remember that Japan has been seeing more and more green shoots in its economy lately. A reading higher than the 2.4% annualized increase (against June’s 3.3% uptick) that markets are expecting could provide some support for the yen.
Global risk sentiment
What’s another trading week without some risk on/off price action! Over the next couple of days the focus will likely be on how the U.S. interacts with its major trading partners.
Specifically, traders will look at how the U.S. will get Canada to give up some of its trading demands or if it will step up its tariff plans for China’s goods. Increased protectionism will affect a lot of trade-dependent, higher-yielding bets, so make sure you stay tuned for any updates that might affect risk sentiment!
Last Week’s Price Review
The yen is turning in a more mixed performance this week (as of 8 am GMT) after getting whupped across the board last week. The yen is a net winner, though. Well, for now at least.
As usual, most JPY pairs were taking directional cues mainly from bond yields. The only pair that didn’t seem to track bond yields very closely was USD/JPY, but that likely has to do more with the Greenback’s weakness on Monday and Tuesday than anything on the yen’s part. Also, USD/JPY started to march in step with the rest of the JPY pairs when Wednesday came around.
As to why bond yields were on the rise from Monday until Wednesday, that was attributed mainly to progress in NAFTA talks by market analysts. Bond yields turned lower later, though, and some market analysts attributed that to the PCE price index meeting expectations, while other market analysts blamed safe-haven demand for bonds on Thursday.
Speaking of safe-havens, risk sentiment also had an effect on the safe-haven yen’s price action (as usual).
A clear example of this is during Wednesday’s Asian session since bond yields were pulling back at the time, but the yen continued to weaken, likely because of the risk-on vibes during the session.
It’s also very likely that the yen was directly benefiting from safe-haven demand as well since bond yields are closing the week generally higher but the yen is currently mixed but a net winner.