Investing.com – The pair has seen volatile trading lately, and Citigroup is discussing its potential moves as Japan and the US host elections in the near future.
At 09:00 EST (13:00 GMT), USD/JPY was trading down 0.1% at 148.09 yen, after trading at a two-month high of 149.12 yen at the start of the week.
In Japan, Shigeru Ishiba, who recently took office as the 102nd prime minister, last week called for early elections on October 27th.
The House of Representatives has 465 seats, while the LDP currently holds 258 seats, while its coalition partner Komeito holds 32 seats. The ultimate measure of Prime Minister Ishiba’s success will be whether he can maintain the 233-seat majority for the LDP-Komeito alliance.
“The LDP’s approval ratings have fallen due to several political scandals over the past few years, so it will almost certainly lose seats in this month’s election. However, we cannot envision the ruling coalition losing the 57 seats, meaning it no longer has By majority.
Therefore, “we do not believe that the Japanese general elections will be a significant driver for USD/JPY,” Citi added. “The US presidential election the following week is likely to have a greater impact.”
Under a Harris administration or a Trump administration, we believe that the type of yen-buying interventions that the Japanese government has undertaken over the past several years may be somewhat acceptable.
However, it may be difficult to intervene to sell the Japanese yen (buy the US dollar), and this may become practically impossible under the Trump administration, since former President Trump will likely try to reverse the strong trend of the US dollar.
“We are bearish on this currency pair in the longer term, but our base scenario in the medium term is a recovery to around 150 yen by the end of the year,” USD/JPY rebounded after 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 a near-term uptrend for the 100-day or 200-day lines (currently around 151.5 yen),” Citi added.