Yen Falls On Call For Early Elections
?? Fundamentals
Yen futures fell sharply earlier this week, as Japanese Prime Minister Yoshihiko Noda offered to hold elections in mid-December if opposition leaders would agree to legislation that could aid the struggling Japanese economy. Some analysts expect the leading opposition Liberal Democratic Party to win the upcoming elections, which would most likely make Party President Shinzo Abe the new Prime Minister.
Mr. Abe has already called on the Bank of Japan (“BOJ”) to implement stronger easing measures to help stimulate the economy. Among the possible actions the BOJ may take include the unlimited printing of money to help weaken the value of the Yen. This is similar to the policy of the Swiss National Bank (“SNB”) which has vowed to defend a rate of 1.20 for the Swiss Franc vs. the Euro.
Mr. Abe has also called on the BOJ to triple the targeted inflation rate to 3% to help break the country out of its deflationary spiral. This news sparked a sell-off in the Yen futures, which fell by over 150-pips on Wednesday and nearly 200-pips on Thursday once support at 1.2400 was taken out. So, unless we see more “risk-off” buying of the Yen in the next several weeks, this potential policy shift could trigger fresh trend-following selling if near-term support near 1.2250 fails to hold.
?? Technical Notes
Looking at the daily continuation chart for Japanese Yen futures, we notice Wednesday’s sell-off took the value of the Yen below both the 20 and 200-day moving averages. The 14-day RSI has moved into oversold territory, with a current reading of 29.53. 1.2250 is the next “line in the sand” for Yen bulls, with resistance found at the November 9th highs of 1.2650.
———————————————————————————————————–
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the “”Disclosure Statement for Futures and Options”” prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.