Fundamental Analysis

• Shigeru Ishiba defeats candidate Sanae Takaichi in a surprise victory and is expected to be appointed as the 102nd Prime Minister of Japan.
• USDJPY sharply fell from the 146 JPY range to the 142 JPY range, with growing expectations of an early interest rate hike by the Bank of Japan.

USDJPY technical analysis

Analyzing the daily chart of USDJPY. USDJPY is reversing at the 52-day moving average. With Ishiba, who emphasizes the independence of the Bank of Japan and shows a willingness to allow rate hikes, becoming Prime Minister, the movement to buy back the yen is intensifying.

The stock market is also affected. The Nikkei 225 index has fallen by more than 2,000 JPY in after-hours trading, as there is caution toward potential increases in capital gains taxes. However, since Ishiba’s policies have not yet been implemented, there is a possibility of a rebound as over-sold positions could see a reversal.

The USDJPY is showing an “Evening Star” signal, and the downward momentum is strengthening. Caution is needed for moves testing the recent lows.

Day trading strategy (1 hour)

Analyzing the 1-hour chart of USDJPY. The market had been pricing in a victory for Takaichi, pushing USDJPY up to the 146 JPY range, but with Ishiba’s win, it plunged to the 143 JPY range. During overseas trading hours, the yen’s strength continued, with USDJPY eventually falling to the 142 JPY range.

A key point to watch is whether Ishiba will call a snap general election. If a general election is held within the year, USDJPY could see some buying momentum.

The day trade strategy is to sell if USDJPY rises to the 143 JPY range. The sell entry limit order is set at 143.50 JPY, with a take-profit target of 140 JPY and a stop-loss at 145 JPY.

Support/Resistance lines

The following support and resistance lines should be considered moving forward:

• 139.57 JPY – recent daily low

Market Sentiment

USDJPY Sell: 42% Buy: 58%

Today’s important economic indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.