USDJPY TECHS: Corrective Cycle Extends
- RES 4: 141.54 50-day EMA
- RES 2: 140.00 Round number resistance
- RES 3: 139.43 20-day EMA
- RES 1: 138.12 High Dec 1
- PRICE: 136.62 @ 15:36 GMT Dec 7
- SUP 1: 135.97/133.63 Low Dec 6 / 2 and the bear trigger
- SUP 2: 132.56 Low Aug 15
- SUP 3: 131.08 1.00 proj of the Oct 31 - Nov 15 - 21 price swing
- SUP 4: 130.41 Low Aug 2
USDJPY is trading higher. The short-term trend condition remains bearish, however, the pair has entered a corrective cycle following the recovery from last Friday’s low. This is allowing an oversold condition to unwind. An extension higher would open 139.43, the 20-day EMA. This average is seen as the first key short-term resistance. On the downside, the bear trigger is unchanged at 133.63, the Dec 2 low. A break would resume the downtrend.
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USDJPY TECHS: Remains Below Resistance
- RES 4: 153.39 3.764 proj of the May 24 - Jul 14 - Aug 2 price swing
- RES 3: 152.30 High Jul 1990
- RES 2: 151.95 High Oct 21
- RES 1: 149.71 High Oct 24
- PRICE: 146.48 @ 16:19 GMT Nov 7
- SUP 1: 145.68/145.11 Low Nov 2 / Low Oct 27
- SUP 2: 144.74 50-day EMA
- SUP 3: 143.53 Low Oct 5
- SUP 4: 141.77 Low Sep 23
USDJPY traded lower again Monday. The pair still appears vulnerable and resistance at 149.71, the Oct 24 high, remains intact. A resumption of weakness would refocus attention on the 50-day EMA at 144.74 - a key support. Clearance of the average would signal scope for a deeper pullback. Note that momentum studies are still pointing down. For bulls, a break of 149.71 would be a positive development and this would expose the bull trigger at 151.95.
US OUTLOOK/OPINION: Midterms: Dollar Likely Unfazed; Debt Limit A Big 2023 Issue
As noted in our midterms asset class outlook circulated earlier - under the consensus case for 2022, 2018’s outcome could echo this time around, with the Fed tightening into an economic downturn/recession expected by many by late 2023.
- The consensus outcome of Democratic losses in 2022 will, on margin, do little to derail the dollar’s rise. And unlike historically in midterms, where policy is in limbo, the White House might rely heavily on executive orders as opposed to legislation. For example, Biden could take an increasingly populist tack going into his re-election year in 2024, particularly on trade – which would further undermine some foreign currencies’ appeal.
- Equities will probably benefit, but it’s not straightforward. Divided government result as it tends to reduce equity market uncertainty. But today is a little different since the White House is likely to exercise executive orders more extensively than the historic post-midterm equity record might suggest.
- The baseline for Treasuries is somewhat more mixed: there wouldn’t be much change in the macro configuration. But the debt limit will become a hugely contentious issue under a Republican Congress, and some brinksmanship is to be expected in 2023. That’s probably priced, but the ultimate impact on Tsys is hard to gauge: we’d be more inclined to expect a “safe haven” move if the debt issue comes to the brink, though have seen arguments that such a bid might not materialize this time.
US: State Department Press Conference Underway Shortly
US State Department Spokesperson Ned Price is shortly due to deliver a press conference from the Department of State.
- Livestream: https://www.state.gov/todays-briefing-schedule/
