- The dollar is hovering near a 2-month peak against other currencies.
- Traders are expecting an 89% likelihood of a 25-bps rate cut by the Fed in November.
- Economists predict the next rate increase from the BoJ to occur in March of next year.
Recent analysis of USD/JPY indicates that rising bets on a Trump win are driving up the dollar against the yen, just two weeks ahead of the presidential election. Additionally, Japan’s upcoming general election could also influence the yen by altering the outlook for the Bank of Japan’s policies.
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The dollar has extended its recent uptrend, trading close to a 2-month high against its peers. The growing support for Trump ahead of the November US presidential election is bolstering the dollar, as a Trump victory is seen as favorable for higher interest rates. However, the competition remains tight, and shifts may occur before the election.
At the same time, the market is analyzing the new perspective on a gradual rate-cutting approach from the Fed. Just a few weeks ago, expectations leaned towards a 50-bps cut in November, but this quickly adapted to incoming data. Presently, there’s an 89% chance of a 25-bps rate cut in November.
Before the policy meeting, the U.S. is set to release business activity data to assess the health of the manufacturing and services sectors.
In Japan, the forthcoming general election on October 27th could alter the parliamentary majority, impacting Ishiba’s standing, which could subsequently influence Japan’s monetary policy outlook. After its first rate hike in March, the Bank of Japan has hit pause. Furthermore, recent polling by Reuters suggests that most economists anticipate the next rate hike to occur in March of the following year.
Key USD/JPY Events Today
Today, there are no significant reports scheduled from either the U.S. or Japan, potentially allowing the dollar to continue its upward trend.
Technical Analysis of USD/JPY: Bulls Reach New Heights
From a technical perspective, the USD/JPY is making upward strides, aiming for new highs in its ongoing uptrend. The price remains comfortably above the SMA, with the RSI indicating bullish momentum. However, for some time, pricing has been hovering around the SMA, leading to a slight deceleration in the uptrend’s slope.
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Simultaneously, while prices are reaching higher highs, the RSI is recording lower highs, signifying diminishing enthusiasm. Should this trend persist, a reversal to the downside may occur. Conversely, if bulls maintain their momentum, the price may test the 152.02 resistance level again.
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