Trading USDJPY and NZDJPY Ahead of Japan’s Election

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  • Trading USDJPY and NZDJPY Ahead of Japan’s Election

Prime Minister Shinzo Abe called a snap election last month to further strengthen his power now that the main opposition Democratic Party is in complete shambles.

While the October 22 election will test Abe’s popularity in Japan, the Prime Minister is widely expected to win. However, the usual uncertainty that associates with politics and financial market plunged the Japanese Yen across board on Friday. But not against the New Zealand dollar as explained here.

USDJPY

The US dollar rose against most of its counterparts on Thursday after the Senate adopted 2018 fiscal budget in a move widely regarded as a show of unity ahead of President Donald Trump’s proposed tax reform.

“This now allows for the passage of large-scale Tax Cuts (and Reform),” Trump tweeted Friday, saying that Paul will vote for tax cuts.

Rand Paul is the Republican Senator from Kentucky that voted against the budget.

Accordingly, this announcement bolstered US dollar attractiveness against the Japanese Yen to 113.51, its highest price level since July.

USDJPYWeekly

Fundamentally, both the US dollar and Japanese Yen are strong. However, political uncertainty weigh on the Yen in the near term, at least pending election outcome.

Therefore, USDJPY may touch 114.43 resistance level per adventure Shinzo Abe lose the election or win with a slight margin that gives voice to the opposition in parliament. A convincing victory would strengthen Yen against the US dollar to 111.81 support.

NZDJPY

The Japanese Yen maintained its gain against the New Zealand dollar as both nations are in the midst of electoral transition.

While New Zealand First coalition, the ruling New Zealand party, is yet to announce its economic plan. The market believes it would revolve around immigration cut and subsequently low economic growth.

Trading USDJPY and NZDJPY Ahead of Japan's Election

The negative perception of the coalition party dampened the currency attractiveness, even against the Japanese yen. A positive outcome in Japan on Sunday would likely plunge this pair further below the ascending channel, a close below the 78.83 support level should reinforce sellers’ interest towards 76.25 targets in coming days. A strong economic team in New Zealand and poor outcome from Japan on Sunday would void this analysis, otherwise, I will expect bearish continuation.

Read: NZDJPY Heading Towards Target

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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