The recent elections in Japan have caused some instability in the USD/JPY pair, with the Japanese yen falling to around 152.95 in early Tuesday trading. This drop can be attributed to the uncertainty surrounding the formation of the new government and the potential impact on economic policies. The ruling coalition’s loss of majority has raised concerns about the continuity of Japan’s stable economic policies. A hung parliament could complicate the passage of economic policies, leading to uncertainty around future economic and monetary plans, including the anticipated interest rate hike by the Bank of Japan (BoJ).
On the other hand, U.S. Treasury yields have influenced the movements of the USD/JPY pair. Expectations of a less aggressive monetary policy by the U.S. Federal Reserve have supported the dollar, making it relatively more attractive compared to the yen. However, if U.S. economic data shows weakness, the dollar could face pressure, giving the yen a chance to recover.
The political landscape in Japan plays a crucial role in the future direction of the pair. The inability of the Liberal Democratic Party to secure a majority and form strong alliances has added to the uncertainty. This has led to a decline in U.S. Treasury yields, indirectly supporting the USD/JPY pair.
Looking ahead, the market’s response to Japan’s political outcomes and U.S. monetary policy developments will determine the medium-term stability of the pair. The U.S. dollar is expected to remain strong against the yen unless there are significant changes in the BoJ’s monetary policy or political stability in Japan.
Overall, the direction of the USD/JPY pair will depend on a combination of factors, including Japan’s political and economic outlook, U.S. economic data, and the support for the dollar from U.S. yields. Resistance levels for the pair are seen at 155 and 156.50, while support levels are at 151.50 and 150.60-150.70.
In conclusion, while there is anticipation and uncertainty in the Japanese financial markets, the USD/JPY pair remains in an upward trend. The pair’s movement is tilted to the upside in the near term, with resistance levels at 155 and 156.50. Support is located at 151.50 and 150.60-150.70.
In the short term, the pair is trading within a sideways channel formation, with bulls aiming to extend the rally towards 153.75 or higher and bears looking to take profits around 152.46 or lower. On the longer-term daily chart, USD/JPY is trading within an ascending channel formation, with bulls aiming to push the uptrend towards 155.03 or higher and bears seeking pullbacks around 149.40 or lower.
Support Levels: 152.73 – 152.32 – 151.65
Resistance Levels: 153.54 – 153.94 – 154.61
