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Uncertainty surrounding the US election and bets on a Fed rate cut are keeping traders away

Uncertainty surrounding the US election and bets on a Fed rate cut are keeping traders away | 05 November 2024

05 November 2024, USD/JPY

Uncertainty surrounding the US election and bets on a Fed rate cut are keeping traders away

USDJPY:

The Japanese yen (JPY) is experiencing a decline against its US counterpart during Tuesday's Asian session, moving away from the one-week high reached the previous day. Nonetheless, the probability of a Japanese Yen decline is constrained as market participants may exercise caution in making aggressive directional bets due to the uncertainty surrounding the US presidential election. Furthermore, expectations of an interest rate increase at the forthcoming Bank of Japan (BoJ) meeting in December may also provide support for the yen.

Meanwhile, the unwinding of the Trump trade, as well as expectations that the Federal Reserve (Fed) will cut interest rates later this week, is driving US Treasury yields further lower, resulting in a narrowing rate differential between the US and Japan. This maintains a defensive position for those betting on the US dollar and should serve as a tailwind for the yen. Furthermore, a decline in market risk may favour the JPY and help contain a significant rise in the USD/JPY pair.

Trade recommendation: Trading mainly by Sell orders from the current price level.

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David Johnson
Analyst of «FreshForex» company
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