Investing.com – The pair has been volatile recently, and Citigroup is discussing likely moves for the pair with both Japan and the U.S. hosting elections in the near future.
At 09:00 ET (13:00 GMT), USD/JPY was down 0.1% at 148.09 yen, after hitting a two-month high of 149.12 yen earlier in the week.
Last week in Japan, Shigeru Ishiba, who recently took office as the 102nd prime minister, called early elections for October 27.
The lower house has 465 seats, with the LDP currently holding 258 and its coalition partner Komeito 32. The ultimate measure of Prime Minister Ishiba’s success will be whether he manages to retain a majority of the 233 seats for the LDP-Komeito alliance.
“Support for the LDP has declined in recent years due to various political scandals, so it is almost certain that it will lose seats in this month’s elections. However, we cannot assume that the ruling coalition will lose 57 seats, which would mean that it no longer has a majority,” Citi analysts said in a note dated October 8.
Therefore, “we do not believe that the general election in Japan will be an important factor in shaping the USD/JPY rate,” Citi added. “The U.S. presidential election next week is likely to have a greater impact.”
We believe that under a Harris or Trump administration, the type of yen purchasing interventions that the Japanese government has carried out over the past few years would likely be accepted to some extent.
However, intervening to sell JPY (buy USD) may be more hard, and under the Trump administration it may become virtually impossible, given that former President Trump will likely try to reverse the strengthening USD trend.
“We are negative on this currency pair over the longer term, but our base case for the medium term is a rebound to around 150 yen by the end of the year,” Citi and the USD/JPY currency pair’s rebound after last Friday’s US jobs data was in line with expectations.
“However, we believe that the 350-day moving average (currently around 149 yen) is now turning into a resistance line. We see short-term upside from the 100- or 200-day lines (currently around 151.5 yen),” Citi added.
