“¢ US midterm election results turned out to be a bearish catalyst for the USD.
“¢ Cautious mood underpins JPY’s safe-haven status and exerted additional pressure.
After a rather volatile trading action during the Asian session, the USD/JPY pair now seems to have stabilized near the lower end of its daily trading range, around the 113.15 region.
The pair initially dipped to sub-113.00 level but then rallied around 85-pips to fresh monthly tops as traders scanned the US midterm election results for early insights into the prospect of Congressional gridlock.
With the incoming results confirming the Democratic Party will win control of the US House of Representatives and the Republicans to keep their majority in the Senate, the US Dollar started weakening and prompted some fresh selling at higher levels.
A split Congress was now seen making it difficult for the US President Donald Trump to pursue more aggressive policies and also reduced chances for any further fiscal stimulus, which was eventually seen as a bearish catalyst for the greenback.
Adding to this, the prevalent cautious mood around equity markets was further seen underpinning the Japanese Yen’s safe-haven demand and exerting some additional downward pressure ahead of the European trading session.
In absence of any major market moving economic releases, the pair remains at the mercy of broader market sentiment surrounding the buck as the focus now shifts to the latest FOMC monetary policy update, scheduled to be announced during the US trading session on Wednesday.
Technical levels to watch
On a sustained weakness below the 113.00 handle, the pair is likely to accelerate the slide towards 112.70-65 intermediate support en-route the 112.30-25 horizontal zone. On the flip side, the 113.45 level now becomes immediate resistance, which if cleared should assist the pair to surpass the 113.80 supply zone and reclaim the 114.00 handle.
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