Investing.com – The pair has seen volatile trading lately, and Citigroup is discussing its likely moves with both Japan and the US holding elections in the near future.
At 09:00 ET (1300 GMT), USD/JPY was trading 0.1% lower at ¥148.09, after hitting a two-month high of ¥149.12 early this week.
In Japan, Shigeru Ishiba, who recently took office as the 102nd prime minister, last week called early elections on October 27.
The House of Commons has 465 seats, while the LDP currently has 258 seats and coalition partner Komeito has 32 seats. The ultimate measure of success for Prime Minister Ishiba will be whether he can maintain a 233-seat majority for the LDP-Komeito alliance.
“The LDP’s approval rating has fallen due to several political scandals in recent years, so it is almost certain to lose seats in this month’s elections. However, we cannot imagine the ruling coalition losing the 57 seats, which would mean it no longer has a majority,” Citi analysts said in an Oct. 8 note.
“So we don’t think the Japanese general election will be a major driver of USD/JPY,” Citi added. “Next week’s US presidential election is likely to have a bigger impact.”
We believe that the kind of JPY buying interventions that the Japanese government has been carrying out in recent years would likely be accepted to some extent under a Harris administration or under a Trump administration.
However, it could be more difficult to intervene to sell the JPY (buy the USD), and this could become virtually impossible under a Trump administration, as former President Trump will likely try to reverse the strengthening trend in the USD .
“We are bearish on this currency pair in the long term, but our medium-term base case is a recovery to around ¥150 by year-end,” Citi said, and the USD/JPY recovery following US employment data. last Friday was within expectations.
“However, we believe that the 350-day moving average (currently around ¥149$) is now turning into a resistance line. We see near-term upside versus the 100-day or 200-day lines (currently around ¥151.5).” Citi added.
