USD/JPY Pair Sees Volatility Amid Elections: Citigroup Analysis
The USD/JPY pair has been experiencing turbulent trading recently, with both Japan and the US gearing up for elections. Citigroup experts delve into the potential movements of this currency pair as global politics take center stage.
At 09:00 ET (13:00 GMT), USD/JPY was trading 0.1% lower at ¥148.09 after hitting a two-month high of ¥149.12 earlier in the week.
In Japan, Prime Minister Shigeru Ishiba has called for a snap election on October 27. With the Lower House holding 465 seats, the LDP and its coalition partner Komeito aim to secure a majority of 233 seats. Analysts at Citi predict a drop in LDP approval ratings due to recent political scandals but believe the ruling coalition will likely maintain its majority.
While the upcoming Japanese general election may not significantly impact USD/JPY, the subsequent US Presidential election could have a more substantial effect. Regardless of the administration in power, Citigroup anticipates potential JPY-buying interventions, with challenges in selling the JPY under a Trump administration.
Looking ahead, Citi remains bearish on the USD/JPY in the long term but expects a recovery to around ¥150 by year-end. The 350-day moving average is now seen as a resistance level, with potential short-term upside to the 100-day or 200-day lines.
In conclusion, the political landscape in Japan and the US is set to influence the USD/JPY pair in the coming months. Investors should stay informed and monitor these elections closely to make sound financial decisions.