Yen weakens ahead of Japan's parliamentary elections
Yen weakens ahead of Japan's parliamentary elections
The U.S. dollar is regaining strength against the Japanese yen following a period of summer weakness. Several factors are driving this resurgence, one of which is the weakening position of Japan's current ruling coalition ahead of the upcoming parliamentary elections.
Over the past 24 hours, the USD/JPY pair confidently broke through the 100-day moving average at 150.7 and, at the time of writing, was trading above 150.8.
Currency market analysts from UOB Group, Quek Ser Leang and Peter Chia, noted that the U.S. dollar (USD) could push above the key resistance level of 151.00, although it may struggle to stay above this level. However, in the long term, the bullish momentum appears to be strengthening, with a focus shifting above 151.00.
“Not immediately, but after a pullback, it seems likely that the bulls' next target around the 151.75 level will be reached,” says Anton Kharitonov, an analyst from Traders Union.The U.S. dollar is being supported by moderate expectations for further interest rate hikes by the Federal Reserve, combined with weakening positions of the ruling LPD-Komeito coalition ahead of Japan's elections, which will take place this Sunday.
Strength test
The weakening political influence of Prime Minister Shigeru Ishiba could delay the formation of the government and the normalization of the Bank of Japan’s (BoJ) activities.In this context, ING analysts note that by the time of the U.S. elections on November 5, USD/JPY could approach the 153-155 range. However, before that happens, the dollar will need to test the 200-day moving average at 151.3, which could provide stronger resistance than the 100-day EMA.
It’s important to remember that the USD/JPY forecast suggests a cautious approach, as the pair is trading within a narrow range and facing both economic and technical challenges. While the Japanese yen (JPY) is trying to extend its recent rebound from early August lows, uncertainty regarding BoJ's rate hike strategy continues to weigh on its strength.
