As the world watches the lead-up to Tuesday’s pivotal U.S. presidential election, the Japanese Yen (JPY) has shown a remarkable resilience, appreciating against the U.S. Dollar (USD) amidst growing uncertainties. This movement comes in the wake of disappointing Nonfarm Payroll data that contributed to the USD’s decline, leaving market participants to speculate on the potential ramifications of political and economic shifts.
Yen’s Rise Amid Limited Liquidity
On Monday, the JPY gained traction as the USD depreciated, yet liquidity remained constrained due to the closure of Japanese markets for Sports Day. This holiday prevents physical trading of U.S. Treasuries, limiting the ability of investors to fully capitalize on the Yen’s strength. Despite these challenges, the recent price action reflects a cautious optimism among traders, as they anticipate the outcomes of the election and subsequent monetary policy directions.
In a recent press conference, Japan’s Chief Cabinet Secretary, Yoshimasa Hayashi, reaffirmed the government’s commitment to closely collaborate with the Bank of Japan (BoJ) to craft appropriate monetary policies that align with their inflation targets. However, market analysts are wary of potential volatility ahead. The political landscape has shifted with the Liberal Democratic Party’s (LDP) parliamentary majority win last week, leaving many uncertain about the future direction of the BoJ’s policies.
Economic Indicators Shape Market Sentiment
The recent release of the U.S. Nonfarm Payrolls (NFP) showed a modest gain of only 12,000 jobs in October, significantly below market expectations of 113,000. This, coupled with a steady unemployment rate of 4.1%, has fueled speculation about the Federal Reserve’s interest rate decisions. According to the CME FedWatch Tool, there is a staggering 99.6% chance that the Fed will implement a quarter-point rate cut in November, further weighing on the dollar’s strength.
As the USD/JPY pair hovers around 151.80, daily chart analysis reveals a potential weakening bullish bias, as the pair has broken below its previously ascending channel. Nevertheless, the 14-day Relative Strength Index (RSI) remains above 50, suggesting that bullish momentum is still present.
Also read : Japan’s Manufacturing Output Contracts Again- October PMI Drops From 49.7 to 49.2
Looking Ahead: Resistance and Support Levels
Traders are keenly watching the 152.90 level, which serves as the lower boundary of the ascending channel for the USD/JPY pair. A successful re-entry could signal a move towards the recent high of 153.88 before testing the upper boundary near 158.90. Conversely, immediate support can be found at the 14-day Exponential Moving Average (EMA) around 151.60, with a psychological support level at 150.00 looming just below.
As election day approaches, the stakes have never been higher. Polls indicate a tight race, with Vice President Kamala Harris slightly leading in key states like Nevada and North Carolina, while former President Donald Trump maintains a narrow edge in Arizona. With all matchups in battleground states falling within a 3.5% margin of error, uncertainty looms large over the financial markets.
