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The yen was at the bottom of the heap last week thanks to a combo of weak domestic data and improved market risk sentiment. Will we see the same trends this week?

Core machinery orders (Jan. 15, 11:50 pm GMT)

As we can see below, Japan’s lower-tier reports can also cause a blip or two (or a hundred) for the yen pairs.

The biggest reports to watch are the preliminary machine tool orders (Jan. 15, 5:58 am GMT) and the core machinery orders because Japan’s economy heavily relies on exporting manufactured goods.

Analysts are expecting another 3.1% growth in November after October’s 7.6% uptick. Stronger numbers might provide a much-needed lift for the yen, while a significantly weaker release could extend its downtrend from last week.

Kuroda’s speech (Jan. 17, 3:20 am GMT)

The Bank of Japan (BOJ) head honcho is scheduled to give a speech at the G20 Symposium scheduled in Tokyo near the end of the week.

Watch out for any clues on how aggressive the central bank wants to be in tapering its stimulus program this year!

Market risk sentiment

There are no scheduled talks between the U.S and Chinese trade reps over the next couple of days, so yen crosses will likely take their cues from other catalysts instead.

The Brexit drama might take center stage as U.K.’s Parliamentary is scheduled to vote on the Withdrawal Bill.

Word around is that PM May is about to be handed an epic defeat, which she might dodge by re-scheduling the vote instead.

Any uncertainty over the vote (or the future of any Brexit deal, for that matter) is not good for risk sentiment in general, so keep your eyes peeled in case the yen starts reacting to Brexit headlines.

Last Week’s Price Review

The yen was THE biggest loser on this week of positive global risk sentiment, and likely on a string of weaker-than-expected economic data from Japan.

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

Major Market Drivers for the Japanese Yen

While there was a flow of Japanese economic data releases that likely ignited a little bit of yen volatility (and possibly weakness), it looks like price action was mostly driven by global bond yields and broad risk sentiment.

This was mostly due to hopes rising that a deal is forming in the U.S.-China trade negotiations story through the early part of the week, sparking traders to lighten up on safe haven assets like bonds and low yielding major currencies like the Japanese yen.

The yen did catch a bid mid-week on possibly recession fears brewing among Federal Reserve members, the drama at the White House on the border wall/government shutdown issue, and/or possibly on weakening global economic data (most notably from China).

But forex traders went back into sell mode on the yen to close out the week, likely on a return to positive global risk sentiment, and possibly on a string of negative Japanese economic data points and headlines that Japan will have to revise wage calculations and budgets due to data errors.

Japanese Headlines and Economic data