Euro retreats as the Japanese Yen picks up following intervention warnings

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The Euro (EUR) has snapped a five-day winning streak against the Japanese Yen (JPY) on Friday, as comments by Japanese authorities regarding Yen speculation have put investors on their toes.

EUR/JPY pulls back to the 185.30 area but remains on track for a four-week rally.
The Yen trims losses on positive Japanese data and Tokyo intervention warnings.
Eurozone data is showing worrisome figures with German CPI on the horizon.

The Euro (EUR) has snapped a five-day winning streak against the Japanese Yen (JPY) on Friday, as comments by Japanese authorities regarding Yen speculation have put investors on their toes. The EUR/JPY pair is trading at 185.00 at the time of writing, after retreating from session highs around 185.65, although still on track to its fourth consecutive weekly appreciation..

Japanese Cabinet Secretary Minor Kihara affirmed on Friday that he is ”extremely concerned” about speculative Yen moves, which have been read by the market as a signal that Tokyo is ready to step in to support the JPY. Kihara also assured that the government's stance is “always to take appropriate action on forex”, although he refused to comment on any particular exchange level.

Oil prices and low JGB yields are bleeding the Yen

The Yen has been hammered by a mix of investors’ concerns about the Japanese economy's exposure to the high Oil prices and the comparatively low Japanese Government Bond (JGB) Yields. These wide yield differentials make the Japanese Yen the vehicle of choice for carry trading, consisting of borrowing a low-yield currency and exchanging it for a higher-yielding one.

On the macroeconomic front, Japanese data revealed earlier on Monday that Tokyo Consumer Prices Index figures eased in May, although the strong Industrial production and the decline in the Unemployment Rate keep hopes of an upcoming Bank of Japan (BoJ) rate hike alive.

In the Eurozone, France’s Gross Domestic Product (GDP) contracted in Q1, , to expectations, while consumer inflation rose to levels well above the European Central Bank’s (ECB) 2% target in May. Later on the day, Italian GDP and Consumer Price Index (CPI) will follow, ahead of the German CPI reading, which will complete a data-packed session and provide the fundamental background for Euro crosses.

Economic Indicator

Tokyo CPI ex Fresh Food (YoY)

The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region excluding fresh food, whose prices often fluctuate depending on the weather. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

Economic Indicator

Industrial Production (MoM)

The Industrial Production released by the Ministry of Economy, Trade and Industry measures outputs of the Japanese factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. A high reading is seen as bullish for the JPY, whereas a low reading is seen as bearish.