Japanese Yen Plunged Amid Political Uncertainty

Fundamental Analysis

* Coalition Collapse: The Japanese Yen has faced a substantial setback against the dollar due to political upheaval in Japan. Japan’s longtime ruling party has lost its majority for the first time in 15 years at Sunday’s national election, prompting concerns about the world’s fourth-largest economy and the uncertainty over the make-up of the next government, per Reuters. According to NHK, the ruling Liberal Democratic Party and its coalition partner Komeito won just 215 of the lower house’s 465 seats, falling short of the 233 required for a majority. The main opposition, the Constitutional Democratic Party of Japan (CDPJ) won 148 seats, a significant increase from 98. The election result raises the risk of a hung parliament, potentially leading to increased fiscal spending, with markets perceiving a higher likelihood of a shift towards more dovish economic policy.

Technical Analysis

* Technical Breakout: USDJPY was traded higher following prior breakout above the previous resistance level 152.20. MACD which illustrate bullish bias signal with the formation of golden cross suggest the pair to likely further extend its gains.

* Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 155.350. Conversely, a potential reversal is also to be expected and the price could head back towards 152.200.

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Potential Risks

Looking ahead, investors will turn their attention to key upcoming U.S. data, including the ADP Non-Farm Employment Change, GDP, Core PCE Price Index, and Non-Farm Payroll. Additionally, close attention will be on the Bank of Japan’s Interest Rate Decision, as recent election outcomes could potentially influence the central bank’s stance.

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Monitoring

Stay updated on US and Japan data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.