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Market risk appetite dragged the yen to the bottom last week. Will the bulls step up their game this week?

Japan won’t be printing top-tier economic reports, so market players can take their cues again from overall risk sentiment and bond yield movements.

This week traders will likely pay attention to the CPI and retail sales reports scheduled in the U.S. Upside surprises support the Fed’s hawkishness and could push the dollar higher, while significant misses can inspire profit-taking that could drag USD/JPY lower.

Meanwhile, concerns such as higher interest rates, the U.S.-China trade war, oil price movements, and even Brexit can affect demand for riskier assets and dictate the low-yielding yen’s price action.

Oh, and keep your eyes peeled for other headlines that might affect global bond yields. The yen didn’t track them closely last week, but that won’t stop the bulls and bears from going back to habits this week!

Last Week’s Price Review

The yen is the second biggest loser of the week  (as of 9 am GMT), which is an improvement since the yen limped to the finish line in last place last week.

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

Yen pairs were tracking bond yields (as usual). However, the yen didn’t track bond yields too closely. Also, the prevalence of risk appetite arguably had a bigger role to play this week.

Bond yields were moving lower on Monday, for example, but the yen was broadly weaker on Monday, likely because of the risk-friendly vibes on Monday.

Wednesday is also another good example since bond yields slumped because of signs that the Democrats would take control of the U.S. House of Representative, market analysts say.

However, the yen couldn’t muster enough buyers and eventually weakened across the board even as bond yields slipped, and that’s probably because of the risk-friendly vibes on Wednesday.

The yen also decoupled from bond yields during Thursday’s U.S. session since bond yields rose, but the yen was broadly stronger (except against USD), likely because of the risk-off vibes in the wake of the FOMC statement.

Aside from risk sentiment and bond yields, some market analysts also suggest that monetary policy divergence between the Fed and the BOJ has been applying bearish pressure on the yen.