Japanese Yen dives back closer to multi-month low against USD on US election results

• The Japanese Yen fails to capitalize on the hawkish BoJ minutes-led modest gains.  
• The BoJ rate-hike uncertainty and the risk-on impulse weigh heavily on the JPY.
• The US election results trigger a sharp USD rally and push the USD/JPY pair higher.

The Japanese Yen (JPY) stumbles against its American counterpart in reaction to the incoming US election results, triggering a sharp intraday rally of nearly 250 pips for the USD/JPY pair during the Asian session on Wednesday. The incoming exit polls indicate a lead for the Republican nominee Donald Trump and prompt aggressive US Dollar (USD) buying. 

Furthermore, speculations about the launch of Trump's potentially inflation-generating tariffs, along with deficit-spending concerns, lead to a sharp rise in the US Treasury bond yields. This turns out to be another factor driving flows away from the lower-yielding JPY amid the risk-on impulse – as depicted by a positive tone across the global equity markets.

Meanwhile, investors seem convinced that Japan's political landscape could make it difficult for the Bank of Japan (BoJ) to tighten its monetary policy further. This, to a larger extent, offsets hawkish BoJ minutes, which showed that the central bank will continue to hike rates if economic and price forecasts meet, and does little to lend any support to the JPY. 

Daily Digest Market Movers: Japanese Yen bears are back in control despite hawkish BoJ meeting minutes

• The minutes of the September Bank of Japan policy meeting showed that the central bank plans gradual policy rate increases, though it remains cautious about overseas economic uncertainties, especially from the US.
• This comes on top of BoJ Governor Kazuo Ueda's hawkish remarks last week and keeps the door open for additional rate hikes, which, in turn, provides a modest lift to the Japanese Yen during the Asian session. 
• The initial market reaction, however, turns out to be short-lived and fades rather quickly amid doubts over the BoJ's ability to tighten its monetary policy further in the wake of the political uncertainty in Japan.
• The US Dollar rallies across the board after exit polls indicate an early lead in key swing states for the Republican nominee Donald Trump, triggering a sharp surge of nearly 250 pips for the USD/JPY pair. 
• Rising odds of Trump winning the election fuel speculations about the launch of potentially inflation-generating tariffs, which, along with deficit-spending concerns, push the US Treasury bond yields sharply higher. 
• The yield on the benchmark 10-year US government bond spikes to its highest level since July, contributing to the strong bid tone surrounding the USD and driving flows away from the lower-yielding JPY.

Technical Outlook: USD/JPY seems poised to appreciate further, move beyond the 154.00 round figure awaited

From a technical perspective, some follow-through buying beyond the 153.85-153.90 region, or a three-month peak touched last week, leading to a subsequent strength above the 154.00 mark, 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. 

On the flip side, the 152.30 area now seems to protect the immediate downside ahead of the 152.00 mark and the Asian session low, around the 151.30-151.25 region. This is followed by the 151.00 round figure, below which the USD/JPY pair could slide towards the 100-day Simple Moving Average (SMA) resistance breakpoint, now turned support, around the 150.25 region. Some follow-through selling, leading to a break below the 150.00 psychological mark, will shift the near-term bias in favor of bearish traders and pave the way for deeper losses.