The Japanese Yen (JPY) strengthened on Monday as the US Dollar (USD) declined, likely influenced by rising uncertainty surrounding the upcoming US presidential election. However, JPY liquidity was somewhat constrained due to the closure of Japanese markets for Sports Day, which prevented physical trading of US Treasuries.
Looking ahead, the Yen may face downward pressure as political and monetary policy uncertainties mount following last week’s parliamentary majority win by the Liberal Democratic Party (LDP) coalition, which has led to confusion regarding the Bank of Japan’s (BOJ) policy direction.
In a post-meeting briefing last Thursday, BOJ Governor Kazuo Ueda acknowledged that economic risks in the US appear to be diminishing, suggesting a possible path toward a future rate hike. The BOJ opted to maintain its policy rate at 0.25%, a decision that was widely anticipated.
The decline of the US Dollar may also be attributed to weaker-than-expected Nonfarm Payrolls (NFP) data for October, which was released on Friday. The US Bureau of Labor Statistics reported an increase of just 12,000 jobs, a stark contrast to the revised gain of 223,000 in September and well below market expectations of 113,000. The unemployment rate held steady at 4.1%, aligning with forecasts.
Daily Digest Market Movers: Ahead of the US election, the latest poll reveals that Vice President Kamala Harris holds slight leads in Nevada, North Carolina, and Wisconsin, while former President Donald Trump has a narrow advantage in Arizona. All candidates are in tight races in Michigan, Georgia, and Pennsylvania, with the final New York Times/Siena College poll indicating that all matchups in seven battleground states fall within a 3.5% margin of error.
Japan’s Chief Cabinet Secretary Yoshimasa Hayashi emphasized on Friday that he expects the BOJ to work closely with the government to implement suitable monetary policies aimed at sustainably achieving the central bank‘s price target.
The headline au Jibun Bank Japan Manufacturing PMI recorded a decline to 49.2 in October, down from 49.7 in September. This figure indicates that Japanese manufacturing production continued to decrease at the start of the fourth quarter of 2024, with both output and new order inflows falling at a faster pace.
The US Personal Consumption Expenditures (PCE) Price Index indicated that core inflation rose by 2.7% year-over-year in September. Meanwhile, Initial Jobless Claims fell to a five-month low of 216,000 for the week ending October 25, signaling a resilient labor market and reducing expectations for immediate rate cuts by the Federal Reserve (Fed).
In terms of technical analysis, the USD/JPY pair is currently trading around 151.80 on Monday, having broken below its ascending channel, which suggests a potential weakening of the bullish trend. However, the 14-day Relative Strength Index (RSI) remains above 50, indicating that bullish momentum is still present.
On the resistance side, USD/JPY faces a barrier at the lower boundary of the ascending channel around the 152.90 level. If the pair can re-enter this channel, it may target the recent high of 153.88, before reaching the upper channel boundary near 158.90. Conversely, immediate support for the pair is found at the 14-day Exponential Moving Average (EMA) around 151.60, with additional support at the psychological level of 150.00.
Related Topics:
