USDJPY Forecast: Japanese vs US Political Uncertainty

Key Events:

• Japan’s LDP loses its majority for the first time since 2009
• US Advance GDP (Wednesday)
• BOJ Monetary Policy (Thursday)
• BOJ Press Conference (Thursday)
• US NFP and ISM PMI (Friday)

For the first time in 15 years, Japan’s Liberal Democratic Party (LDP) has lost its clear majority, triggering political uncertainty and intensifying bearish pressures on the yen. There is currently no clarity on the country’s leadership, and the yen has already depreciated by 10% between September and October.

BOJ’s Monetary Policy Outlook

The BOJ is expected to maintain interest rates at 0.25% on Thursday, especially given the recent decline in Tokyo CPI, which has dropped below the 2% benchmark to 1.8%. However, due to the yen’s weakness, contractionary policies may be on the table. All eyes will be on the BOJ press conference on Thursday, as clarity is awaited regarding Japan’s economy in light of the latest data and political developments.

Further Volatility from Key Global Events

With the current weakness back above the 153-mark, notable volatility can be expected with the upcoming key events, including the BOJ decision on Thursday, non-farm payrolls (NFP) on Friday, and the US elections and Federal Reserve rate decision next week.

Technical Analysis

USDJPY Forecast: 3Day Time Frame – Log Scale

Source: Tradingview

The yen’s depreciation between September and October 2024 is currently aligned with the 0.618 Fibonacci retracement level of the sharp decline between the 161.95 high in July 2024 and the 139.58 low in September 2024.

The USD/JPY pair has broken back into its primary uptrend from 2023 through July 2024, moving above the 50-period simple moving average (SMA). With the Relative Strength Index (RSI) on the 3-day chart showing upward potential, key resistance levels are now at 155, 157, and 159, provided the price holds above 153.80.

On the downside, failing to close above the 153.80 resistance, overbought momentum on the lower time frames (daily and 4-hour) can support a possible pullback below the 153-mark towards levels 149.50 and 145.

--- Written by Razan Hilal, CMT – on X: @Rh_waves