Japanese Yen struggles to lure buyers as BoJ uncertainty offsets US election jitters

• The Japanese Yen weakens slightly on Tuesday, though the downside remains cushioned.
• The BoJ’s hawkish hints, along with a weaker risk tone, offer support to the safe-haven JPY.
• The US election-related uncertainty and Fed rate cut bets keep the USD bulls on the sidelines.

The Japanese Yen (JPY) drifts lower against its American counterpart during the Asian session on Tuesday, lifting the USD/JPY pair away from a one-week low touched the previous day and closer to mid-152.00s in the last hour. Expectations that Japan's political landscape could force expansionary fiscal policy, and make it difficult for the Bank of Japan (BoJ) to hike interest rates further turn out to be a key factor undermining the JPY. 

That said, BoJ Governor Kazuo Ueda's comments during the post-meeting press conference last week keep a potential interest rate hike at the next BoJ policy meeting in December on the table. Apart from this, the market nervousness ahead of the tight US presidential election and geopolitical risks could offer support to the safe-haven JPY. Furthermore, the narrowing of the US-Japan rate differential warrants some caution for the JPY bears. 

Investors now seem convinced that the Federal Reserve (Fed) will lower interest rates later this week, which, along with the "Trump trade" unwinding, leads to a further decline in the US Treasury bond yields. This, in turn, fails to assist the US Dollar (USD) to build on the previous day's goodish rebound from a two-week trough and might further contribute to capping any meaningful appreciating move for the USD/JPY pair. 

Daily Digest Market Movers: Japanese Yen remains depressed amid BoJ rate-hike uncertainty

• The USD/JPY pair regains some positive traction on Tuesday, though a combination of factors might cap the upside ahead of this week's key event risks – the US presidential election and the Federal Open Market Committee (FOMC) meeting. 
• A rare political turmoil after a snap election in Japan cast doubts over the Bank of Japan's ability to hike rates further and exerts some downward pressure on the Japanese Yen, which, in turn, lifts the USD/JPY pair back closer to mid-152.00s.
• Meanwhile, BoJ Kazuo Ueda left the door open for a December rate hike and said last week that the central bank remains committed to normalizing its monetary policy by gradually hiking interest rates if economic data align with forecasts
• Friday's mixed US employment details for October, which showed that Nonfarm Payrolls registered the smallest gain since December 2020, reaffirmed market bets for a 25 basis point interest rate cut by the Federal Reserve later this week. 
• The chances of Donald Trump winning the 2024 US presidential election have deteriorated noticeably and the Democratic Vice President Kamala Harris has a slight lead in some polls, though overall they show a tight race to the White House. 
• This prompts traders to unwind "Trump trades" and leads to a further decline in US Treasury bond yields, narrowing the US-Japan rate differential and offering some support to the Japanese Yen amid a generally weaker risk tone.
• Meanwhile, the "Trump trade" unwinding fails to assist the US Dollar to capitalize on the overnight bounce from a two-week low, warranting some caution for the USD/JPY bulls and positioning for any meaningful appreciating move. 

Technical Outlook: USD/JPY could accelerate the positive move above 153.00 and retest three-month top

From a technical perspective, the 152.00 round figure now seems to protect the immediate downside ahead of the overnight swing low, around the 151.55-151.50 region. Some follow-through selling could drag the USD/JPY pair further below the 151.00 mark, toward testing the 100-day Simple Moving Average (SMA) resistance breakpoint, currently pegged near the 150.30 region. This is followed by the 150.00 psychological mark, which if broken decisively will set the stage for deeper losses. 

On the flip side, momentum beyond the overnight swing high, around the 152.55-152.60 area, could extend further toward the 153.00 mark. The subsequent move up has the potential to lift the USD/JPY pair to the 153.35-153.40 supply zone en route to the 153.85-153.90 region, or a three-month peak touched last week. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding in the positive territory, spot prices might then climb to the next relevant hurdle near the 154.60-154.70 area before aiming to reclaim the 155.00 psychological mark.