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The yen is the early loser in today’s FX trade as the slump that started with the LDP selection of Sanae Takaichi continues. There was initially a sharp drop in the yen (i.e. a rise in USD/JPY) after the October 6 selection but that tempered as she initially struggled to form a government followed by some generalized risk aversion.The risk mood has since stabilized and Takaichi forged a government. Now the market is focused on her priorities around boosting fiscal spending while restraining the BOJ from hiking rates. I suspect we are on our way to a test of the October high.
This article was written by Adam Button at investinglive.com.
đź’ˇ DMK Insight
The yen’s decline signals deeper issues in Japan’s economic policy, and here’s why that matters now: The selection of Sanae Takaichi has triggered a notable shift in market sentiment, particularly against the USD. Traders should pay attention to the USD/JPY pair, which has shown volatility since October 6. This slump isn’t just a reaction to political changes; it reflects broader concerns about Japan’s monetary policy and its potential impact on inflation and growth. If the yen continues to weaken, we might see a ripple effect across other currencies, especially those closely tied to Japan’s trade relationships. Look for key resistance levels in USD/JPY around recent highs, as a sustained break could lead to further downside for the yen. Conversely, if Takaichi’s policies stabilize the economy, we might see a reversal. Keep an eye on upcoming economic data releases from Japan, as they could provide critical insights into whether this trend will continue or reverse. The immediate focus should be on how the market reacts to these developments in the coming days.
đź“® Takeaway
Watch USD/JPY closely; a sustained break above recent highs could signal further yen weakness, impacting related currencies and trade strategies.
