USD/JPY Forecast: Will FBI Torpedo Clinton and US Dollar?

Omkar Godbole FXStreet Contributor

USD/JPY Forecast: Will FBI Torpedo Clinton and US Dollar?

The American Dollar was offered in the NA session on Friday after news hit the wires that FBI reopened an investigation of Clinton emails. The Dollar-Yen pair dropped to a low of 104.46 before ending the day at 104.66 levels. Investigators found 650,000 emails on a laptop used by former Rep. Anthony Weiner and his estranged wife Huma Abedin, a close Clinton aide.

Clinton’s lead narrowed on FBI concern

FBI revived questions about Mrs. Clinton’s use of a private email server as secretary of state. The question everyone is asking is whether the heightened FBI concerns can still upend an election that is already over for millions of voters.

If reports are to be believed at least 21 million voters have already voted so far. Close to a quarter of the electorate in key states - Florida, Colorado and Nevada - have voted. Experts say early turnout has clearly been in favor of Clinton, although it has weakened somewhat over the weekend.

Clinton advisors are confident about victory

Clinton advisers are emphatic that they would not be thrown off stride. They have decided to keep their strategy, television advertising and campaign plans unchanged. Many say that FBI reopening the investigation is ‘too little and too late’ for Trump to gain any advantage over Clinton.

An FX perspective

Friday’s sell-off in the US dollar clearly shows that anything that puts Clinton on the back foot will not be well received by the markets. However, dollar bulls have little reason for worry as the December Fed rate hike probability as represented by CME data still hover around 70%. No wonder, the Dollar strength is coming through in Asia. The Dollar-yen pair has recovered from the low of 104.40 to 104.88 levels as I write.

Traders should keep an eye on the news flow related to Clinton’s probe. Yen demand could spike if the court gives a go ahead to begin reviewing Clinton emails.

Technicals - Close below 104.32 could weaken bulls

Daily chart

Despite pair’s retreat from the high of 105.32 to 104.40 on Friday, the close above 104.32 (at 104.66) followed by a rebound from 104.40 to 104.84 in the Asian session today suggests the bullish tone remains intact with doors open for a revisit to and a possible break above 105.32 (Friday’s high), in which case 105.83 (monthly 200-MA) stands exposed.
On the lower side, only a daily close below 105.32 (September high) would signal bullish invalidation.

AUD/USD Forecast: Eyes rising trend line support

Daily chart

Despite Friday’s recovery from the low of 0.7558, the subsequent failure to close above 0.76 handle followed by the rejection in the Asian session today at 0.76 suggests the spot could revisit 0.7558 and may actually breach the same for a test of rising trend line (drawn from Jan 20 low and May low) support seen today around 0.7526 levels.
On the higher side, a move back above 0.76 could yield a test of 0.7608 (Thursday’s high) although on a slightly larger scheme of things, only a daily close above 0.7735 would suggest bearish invalidation.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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