Concerns Over Fed Meeting and Presidential Election Drag on USDJPY

Japanese Yen reclaimed lost ground against the U.S dollar, sending the pair USDJPY to the lowest since last Wednesday at 104.225. The USD wobbled notably amid news that presidential polls have tightened significantly in recent days and ahead of a series of economic data and important events coming in the next two weeks.

The Yen weakened slightly after the Bank of Japan left its monetary policy unchanged while pushing back the timing for hitting its inflation target again on Tuesday. The BOJ Governor Haruhiko and his colleagues maintained targets for controlling short-term and long-term rates as well as asset-purchase programs, but shifted the projected timing for reaching its inflation target of 2 percent to “around fiscal 2018”.

The central bank stated that it would continue buying Japanese government bonds at an annual pace of about 80 trillion yen ($764 billion), and made no changes to its previous plans for purchases of other assets, such as exchange-traded funds.

The Yen rebounded as the greenback weakened across the board. The U.S dollar failed to benefit from higher-than-expected manufacturing data that supported the case of the Federal Reserve to increase interest rates at its December meeting.

 The Institute for Supply Management reported its manufacturing index rose to 51.9% in October, the highest in three months. The reading was slightly ahead of 51.7% forecast by economists. A similar survey of industry executives produced by IHS Markit also pointed to an improvement in manufacturing activities last month. The Markit index hit a one-year high at 53.4.

However, the U.S construction spending released by the Commerce Department unexpectedly declined 0.4% in September, as spending on private nonresidential structures recorded the biggest decline in nine months.

Topping to mixed data that could not power the greenback’s strength, recent polls showing the tightening presidential race between Republican nominee Donald Trump and Democratic rival Hillary Clinton also weighed on the U.S dollar. Enthusiasm for the Democratic candidate has warned since FBI Director James Comey on Friday said the bureau would reopen the investigation into Clinton’s misuse of a private email server.

The U.S Federal Reserve will announce its rate decision on Wednesday, and is expected to leave rates unchanged ahead of the presidential election next week.

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Fig: USDJPY H4 Technical Chart

USDJPY has retreated below the 23.6% Fibonacci retracement at 104.750 after moving sideways above this level for two days. The price action has crossed over both two moving averages and brought market back into the bearish territory. As can be observed from indicator windows, RSI index has confirmed the downtrend by dropping below the 50 line – which devides the bullish zone from the bearish area.

Trade suggestion

Sell Stop at 104.250, Take profit at 103.160, Stop loss at 104.600

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