Investors growing increasingly bullish on the yen may have to re-examine their outlook if retail sales and industrial production figures due this week add to mounting evidence that the Japanese economy is slowing.

The currency — the best performer among its Group of 10 peers last year — started 2019 with a bang as money managers sought haven assets amid signs of slowing global growth.

Analysts from Deutsche Bank and Credit Agricole to Commerzbank predicted the yen will strengthen to as much as 100 per greenback this year, driven in part by expectations that the Bank of Japan will pivot away from its massive monetary stimulus program.

But the currency has begun to lose its appeal as risk appetite returns. To make matters worse, recent economic reports from machinery orders to exports and vehicle sales have come in decidedly on the downside. That makes December retail sales and factory output figures, to be released Wednesday and Thursday, all the more important.

With dollar-yen rates already testing technical resistance near the 110 level, more bad news on the data front will likely forestall any chance of a decline in the near term.

After sliding 1 percent month over month in November, industrial production is forecast to have dropped another 0.5 percent last month, according to a Bloomberg survey of economists. Retail sales figures are predicted to be slightly better, with a 0.4 percent advance seen following November’s 1.1 percent decline.

While a more hawkish BOJ would certainly help the yen regain its momentum despite recent dour data, signs of policy normalization failed to manifest following last week’s Policy Board meeting. Officials cut their core inflation forecasts for fiscal 2019 and 2020, prompting interest-rate markets to dial back any tightening expectations priced into the forward overnight index swap curve.

Technicals aren’t offering much help either, with the dollar-yen’s moving average convergence-divergence, a momentum indicator, beginning to turn bullish, rising above the signal line and approaching zero.

A global economic downturn may be one of the few potential saving graces for the Japanese currency. The International Monetary Fund last week downgraded its forecast for the second time in three months and warned that fresh trade tensions could spell further trouble.

U.S. Commerce Secretary Wilbur Ross said last Thursday that Washington and Beijing remain “miles and miles” from a resolution to the trade war, and that the outcome will hinge on whether China agrees to deepen economic reforms and further open its markets.

Yet should Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer make progress toward breaking the impasse when they meet in Washington later this week, the prospects of the yen approaching 105 per dollar anytime soon — much less 100 — will seem far fetched indeed.

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