Political Risk: Japan’s Upcoming Elections
Japan’s parliamentary elections scheduled for July 20 represent a significant risk factor. Current Prime Minister Shigeru Ishiba’s party risks losing its upper house majority, according to recent polls, potentially triggering increased instability in debt and currency markets. A change in parliamentary balance could intensify concerns about public debt sustainability, particularly given that annual interest payments already surpass Japan's defense budget. Nearly 90% of government bonds are domestically held, predominantly by the Bank of Japan, reinforcing concerns about Japan’s debt financing dynamics.
Despite these potential catalysts, significant volatility ahead of the elections remains unlikely. The USD currently holds a strong position, with the USDX Index at approximately 97.50, slowly moving away from annual lows as investors become accustomed to Trump’s fluctuating trade rhetoric.
Investor Sentiment: Cautious Approach to US Tariff Policy
Investors appear measured in response to President Trump’s latest announcement of a 30% tariff on European imports, interpreting it partly as a strategic negotiation tactic. Additionally, many European products, including steel, aluminum, vehicles, and recently copper, already face hefty tariffs around 50%, minimizing shock value from the announcement.
Technical Overview: USD/JPY Resistance and Support Levels
On the daily chart, USD/JPY is correcting upwards within an ascending trend, currently testing the resistance boundary of a triangular consolidation pattern spanning 147.50 to 142.50.
Technical indicators signal cautious bullishness. The Alligator indicator’s fast EMAs remain positioned above the signal line, reflecting bullish sentiment, while the Awesome Oscillator (AO) histogram near the transition zone hints at consolidation.
- Support Levels: 146.20, 142.50
- Resistance Levels: 148.50, 151.10
Trading Recommendations for USD/JPY
Long positions: Traders should consider BUY STOP orders above 148.50, targeting a rise to 151.10 with a Stop Loss at 147.50. Expected timeframe: one week or longer.
Short positions: Initiate SELL STOP orders below 146.20, aiming for 142.50, setting a Stop Loss at 147.20 if market momentum reverses bearish.
