USD/JPY: Sell rallies

USD/JPY rose, as polls skewed in favour of Trump at point of writing. Pair was last seen at 153.91. Daily momentum is flat while RSI rose. Near term risks skewed to the upside. Resistance at 155 and 156.50 (76.4% fibo). Support at 151.60 (200 DMA), 150.60/70 levels (50% fibo retracement of Jul high to Sep low, 100 DMA), OCBC’ FX analysts Frances Cheung and Christopher Wong note.

US election noises may cloud the outlook

“Aside from US elections, Japan is holding a special parliamentary session on 11 Nov to choose the Prime Minister. Ishiba’s cabinet will formally resign on the morning of 11 Nov. Prime ministerial vote can take up to two rounds, where in the first round, lawmakers of different political party typically vote for their respective leaders making it unlikely for any candidate to secure a clear majority. In this case, top two candidates will go into a run-off (in the second round) that only requires a simple majority to win.”

“Assuming no major upset. i.e. Ishiba may still win and a minority government may suffice with opposition DPP and JIP as partners on confidence and supply agreement. Point to note is that these opposition partners had earlier critique BoJ for raising rates. This morning in release of BoJ minutes, one member indicated that policy rate could be 1% in 2H 2025. Last week, Governor Ueda indicated that the current political situation in Japan wouldn’t stop him from lifting rates if prices and the economy stay in line with BoJ’s forecast.”

“Elsewhere, data continues to show wage pressure growing and services inflation broadening. Policy normalisation at BoJ and Fed takes different form (Fed cut vs. BoJ hike cycle) and this should continue to underpin the broad direction to the downside. But in the interim, US election noises may cloud the outlook. We also caution that any sharp, excessive move to the upside may soon bring in chatters of intervention to smooth one-sided moves.”

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