The USD/JPY will be in focus when the markets open after the latest Japanese election. The pair ended the week at 113.90 as investors waited for the election results. This price was slightly below last week’s high of 114.10.
Japan election
The USD/JPY will be watched closely because the election results were relatively different than what analysts were expecting. While Fumio Kishida won the election as was widely expected, his party won more seats than was expected.
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The Liberal Democrats party retained the majority of the Diet’s lower house. The party managed to win about 253 sears by 1 am local time. That was lower than the previous 276 seats but they were enough to secure it victory. The house has 465 seats in the lower house.
Analysts expect that the new government will implement some changes in the coming months. In the past few weeks, Kishido criticized Abenomics for not having the needed results. He has also committed to guiding the country as it battles a prolonged period of near deflation.
In its interest rate decision last week, the Bank of Japan decided to leave interest rates unchanged. It also committed to continuing with its yield curve control and quantitative easing (QE) program. This makes the BOJ the most dovish central bank in the developed countries. Still, Japan is expected to have the slowest recovery among G7 members.
USD/JPY forecast
The next key movers for the USD/JPY will be the upcoming interest rate decision by the Federal Reserve. The bank is expected to leave interest rates unchanged between 0% and 0.25%. It will nonetheless provide guidance for when it will hike rates. The bank will also slash the size of its monthly asset purchases.
The USD/JPY will also react to the latest US non-farm payrolls (NFP) data. The numbers are expected to show that the labour market did well in October.
The four-hour chart shows that the pair has been in a tight range recently. It has managed to decline by about 0.70% from its highest level in October.
Therefore, the pair will likely maintain its bearish trend as bears target the next key support at around 113.0.
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