USD/JPY

Prediction: Increase

Fundamental Analysis:

The Bank of Japan's (BoJ) Summary of Opinions from the October meeting showed mixed views on when to further tighten policy. Analysts think political uncertainty and the effects of Donald Trump’s U.S. presidential win could limit the BoJ’s ability to raise rates.

Shigeru Ishiba, leader of the Liberal Democratic Party (LDP), was re-elected as Japan's prime minister on Monday, but now leads a minority government since his party lost its majority in the lower house—making it harder to pass policies smoothly. Trump’s major victory in the U.S. may also impact Japan’s export sector, as he plans a 10% tariff increase on imports, which could slow Japan’s exports to one of its top trading partners.

Technical Analysis:

The recent sharp pullback in the US Dollar (USD) seems to have gone too far, and instead of weakening further, USD is expected to trade within a range of $152.50 to $153.85. In the longer term, upward momentum has slowed significantly, and if USD breaks below $152.50, it’s likely to trade sideways rather than rise. UOB Group FX analysts Quek Ser Leang and Peter Chia noted that when USD was at $154.55 yesterday, they expected it might go above $155.00 before pausing. However, USD didn’t reach $155.00 and instead dropped sharply to $152.69. The pullback seems overdone, so further weakening is unlikely, and today USD will likely stay between $152.50 and $153.85.

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