USD/JPY – Yen Yawns as Abe Cruises to Supermajority Win

USD/JPY has started the week with gains in the Monday session. In North American trade, USD/JPY is trading at 113.71, up 0.18% on the day. On the release front, there are no US events on the schedule. In Japan, Flash Manufacturing PMI improved to 53.1 points.

On the weekend, Prime Minister Shinzo Abe cruised to an easy victory, as Japanese voters elected representatives to the upper house of parliament. Abe’s Liberal Democratic Party and a small junior coalition party won a convincing victory, winning at least 312 seats out of 465 seats in the lower house of parliament. The result gives Abe a two-third majority in both seats of parliament, which will allow him to continue his policies. We can expect to see the ultra-loose monetary policy continue until inflation moves closer to the Bank of Japan’s target of around 2 percent. Although Abe won a decisive victory, his popularity remains low. The LDP took full advantage of a divided opposition which failed to provide the Japanese voter with a credible alternative. The Tokyo stock markets posted gains after the election, but the Japanese yen responded with slight losses.

Investors are keeping close tabs on the next choice for Federal Reserve chair, with Janet Yellen’s term due to expire in February. President Trump has said he will nominate a new Fed head shortly. The front runners are economist John Taylor and Federal Reserve Governor Jerome Powell. Taylor advocates a rule in which rates which be as high as 3 percent, given current economic conditions. Powell is more closely aligned to Fed Chair Janet Yellen’s monetary stance which advocates an incremental increase in rates. With the two candidates representing sharply differing views on interest rate levels, Trump’s choice for the new Fed chair could have a significant effect on monetary policy and the strength of the US dollar.

 

USD/JPY Fundamentals

Sunday (October 22)

  • All Day – Japanese Upper House Elections

Monday (October 23)

  • 20:30 Japanese Flash Manufacturing PMI. Estimate 53.1

*All release times are GMT

*Key events are in bold

 

USD/JPY for Monday, October 23, 2017

USD/JPY October 23 at 10:45 EDT

Open: 113.51 High: 114.10 Low: 113.51 Close: 113.71

 

USD/JPY Technical

S3 S2 S1 R1 R2 R3
110.94 112.57 113.55 114.49 115.50 116.54

USD/JPY edged higher in the Asian session. The pair has showed limited movement in the European and North American sessions

  • 113.55 was tested earlier in support and remains under pressure
  • 114.49 is the next resistance line

Current range: 113.55 to 114.49

Further levels in both directions:

  • Below: 113.55, 112.57, 110.94 and 110.10
  • Above: 114.49, 115.50 and 116.54

OANDA’s Open Positions Ratios

USD/JPY ratio is unchanged in the Monday session. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards USD/JPY reversing directions and losing ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.