Japanese Elections: Yen Resilient in the Face of a Strong Dollar

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Dollar and Yen Stable
Asia's currency markets were stable on Friday, with the dollar holding most of its weekly gains. The strength in the U.S. currency is due to expectations of a slower pace of interest rate cuts by the Federal Reserve.

The Japanese yen (USD/JPY) was unchanged, hovering around its lowest level in three months, as Japan prepares for a crucial general election this weekend. Warnings of possible intervention in the foreign exchange market have kept traders on the lookout for sharp moves in the currency.

On the technical side Ninja (Ticker AT: USDJPY) is known for its volatility, during the last quarter this cross experienced an inverted shoulder-head-shoulder move and has effectively recovered the price to the area near the long term range, recovering almost +10% of its previous decline and closing the bearish move. At the moment the RSI is overbought at 68.18% so this move could continue to move upwards towards the ¥157.131 per dollar coinciding with the control point (POC) of the main bell . On the delta indicators it can be seen that the upward pressure has overcome the bearish pressure zones so it is not unusual that it is going to check again the middle zone and maybe even ¥161,946 high zone if the elections are to the market's liking. What is clear is that if the intervention factor wins, the stock could fall back to the ¥139 ,571 lows.

Dollar gains driven by political expectations
The dollar index (DX) stabilized, consolidating its fourth consecutive week of gains, also driven by growing expectations of a Donald Trump victory in the 2024 elections. This scenario has raised bets on inflationary policies that would keep interest rates high in the US.

Performance of other Asian currencies
In terms of other Asian currencies, the Chinese yuan (USD/CNY) and the South Korean won (USD/KRW) posted gains, while the Australian dollar (AUD/USD) showed a slight decline. The Singapore dollar (USD/SGD) rose 0.2%, and the Indian rupee (USD/INR) remained near record highs. Most currencies in the region were affected by risk aversion and the outlook for tighter rates in the US.
Ion Jauregui - ActivTrades Analyst




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