That said, the moves we saw in the Japanese yen crosses were nothing short of extreme, which may warrant some caution at the start of this coming week, as the majors could see a bit of a consolidation period. At the same time, event risk for currencies like the Australian dollar, US dollar, euro, and British pound will be very high ahead of a few rate decisions, which will only exacerbate changes in investor sentiment and thus, FX carry trades.
Japanese-specific news will be quite limited. First, the minutes from the Bank of Japan’s latest policy meeting could add to optimism that the economy is in the process of recovery, especially since we already know that they’ve decided to allow their liquidity programs to expire, as planned, in December. Next, Japan’s leading economic indicator is projected to rise to 86.2 for the month of September from 83.2, which would mark a one-year high as well as the sixth month of improvement. Likewise, the coincident index is forecasted to rise to a 10-month high of 92.5 from 91.2, all of which would reaffirm the BOJ’s more optimistic stance on growth. All told, traders looking for a harbinger of Japanese yen strength or weakness may prefer to look toward broader risk trends, as fundamental forces have yet to truly play any role in the currency’s moves.
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