Japanese Yen Analysis: USD/JPY Tests 9-Month Highs as Shutdown Set to End

USD/JPY Key Points

• A bill to reopen the US government could be signed by President Trump by the end of the week, brining the longest government shutdown in history to an end.
• Even if the US government reopens this week, the Federal Reserve may not have access to the timeliest economic data by the time it meets on December 10.
• USD/JPY bulls will turn their attention to the 78.6% Fibonacci retracement of the start-of-the-year swoon just below 155.00 next.

It’s a new week, and markets are starting it off on the right foot.

Over the weekend, eight Democratic Senators crossed the proverbial “picket line” to support a plan to reopen the government in exchange for a vote on healthcare subsidies in December. While it was only a procedural vote so far, it signals the likely end of the stalemate and, following formal votes in the Senate and House, a bill to reopen the government could be signed by President Trump by the end of the week.

Of course, for traders, the most significant development will be the release of delayed economic data from the world’s largest economy. Analysts at BNP Paribas estimate that the delayed NFP data may be released on November 12^th (September) and then November 26^th (October), with PCE inflation reports potentially hitting the wires on November 26 (September) and December 19 (October). The upshot of the delayed data is that, even if the US government reopens this week, the Federal Reserve may not have access to the timeliest economic data by the time it meets on December 10.

Speaking of central banks, Japan’s new Prime Minister Sanae Takaichi and her cabinet are putting pressure on the Bank of Japan not to raise interest rates next month. In comments to the Nikkei newspaper, Economic Adviser Takuji Aida bluntly stated that, "It would be quite risky for the BOJ to raise interest rates in December” and that such a move would run counter to the government’s plan to stimulate the economy. Against that backdrop and rising risk appetite, it’s no surprise that the Japanese yen is the weakest major currency today.

Japanese Yen Technical Analysis: USD/JPY Daily Chart

Source: StoneX, TradingView

Turning our attention to the chart, USD/JPY is rallying back to test its 9-month highs above 154.00 at the start of the US session. The aforementioned storylines offer fundamental support for the well-established technical uptrend, which has accelerated in recent weeks.

Next, bulls will turn their attention to the 78.6% Fibonacci retracement of the start-of-the-year swoon just below 155.00. If that level is broken, there is little in the way of meaningful technical resistance until the 16-month highs in the upper-150.00s. At this point, only a sharp reversal lower to break the convergence of last week’s low, the bullish trend line, and the 21-day EMA near 152.75 would erase the near-term bullish bias.

-- Written by Matt Weller, Global Head of Research

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