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  • USD/JPY is firm on Tokyo as traders await the US midterms.
  • Fed fund futures yields repriced the chance of another rate hike in December at 75% (from 80%) – favours dollar strength.  

USD/JPY has been stable on the 113 handle despite the growing sentiment that Democrats will win the House making it harder for Trump’s domestic agenda to get through Congress.  

USD/JPY traded between a range of 113.07 and 113.34 but settled a little on the soft side when US 10yr treasury yield dipped and was ending the day flat overall at 3.20%. The 2yr yield drifted back up 2bp to 2.91%, where it closed Friday while the Fed fund futures yields repriced the chance of another rate hike in December at 75% (from 80%).

  • Wall Street closes mixed as investors stay on the sidelines ahead of midterm elections

US. Midterm elections  

“It is Election Day in the US. Midterm elections are held every four years, at the halfway point between presidential elections. All 435 seats in the House and 35 of 100 Senate seats face re-election, along with many state governorships. Markets should be braced for a divided Congress (Republicans holding the Senate but Democrats taking control of the House) but US elections often produce surprises,” analysts at Westpac noted.  

USD/JPY levels

  • Support levels: 113.00 112.60 112.30  
  • Resistance levels: 113.40 113.85 114.10

Valeria Bednarik, Chief Analyst at FXStreet explained that the 4 hours chart suggest that bulls have made a pause but didn’t give up:

“The pair remains close, but below the 113.40 region, a strong static resistance, also above its 100 and 200 SMA, although with the shortest below the larger one, which limits the upward potential. Technical indicators in the mentioned chart ease within positive levels, rather reflecting buyers’ on pause than suggesting increased selling interest. The bullish potential will suffer only with a break below 112.60.”