falls after Japanese elections and on weakness. range bound amid mixed fundamental forces.
USD/JPY Falls After Japanese Elections and on USD Weakness
- Yen rises despite the election result
- USD struggles on trade tariff, Fed Powell concerns
- USD/JPY falls but remains near a 3.5-month high
The yen is rising despite the weekend elections in Japan, where the ruling coalition lost control of the upper house, further weakening Prime Minister Ishiba’s power, just as tariff deadlines come into focus. The gain in the yen suggests that the result was already priced in.
PM Ishiba has pledged to remain in power, calming the markets, which, along with the Japanese public holiday, is limiting the reaction.
While the yen is rising today, it still remains near a 3.5-month low as the outcomes heap pressure on the leader at a crucial time for US trade negotiations. It’s questionable whether the government, with such a weak foundation, can negotiate a strong deal.
As far as the is concerned, political instability could make a rate hike difficult to implement, which may keep pressure on the yen in the medium term.
The Bank of Japan has indicated that it’s still looking to raise rates higher and could upwardly revise its inflation forecasts after recent , which was stronger than expected. However, much depends on the trade position with the US. An elevated final tariff could lead the BoJ to struggle with hiking rates due to weaker growth and deflationary pressures.
The US dollar is under pressure, hurt by concerns over US tariffs and worries surrounding the Federal Reserve’s independence. Over the week, Commerce Secretary Howard Lutnick said that August 1st was a hard deadline for new tariffs to take effect.
Concerns surrounding the independence of the Federal Reserve are weighing on the dollar as well after President Trump floated the idea of firing Powell again last week. Such a move could cast doubt on the Fed’s credibility and significantly impact the US dollar, as well as the US Treasury.
Today, there are no U.S. economic data releases scheduled. And this week, the US economic calendar remains relatively quiet, with Thursday’s being the main focus. US earnings season also ramps up this week, which could impact market sentiment more broadly.
USD/JPY Forecast – Technical Analysis
USD/JPY failed to retake the 14865-149.00 resistance zone, rebounding lower. The price is testing 148 support, with a break below here opening the door to 146.00.
Buyers need to close above the 149-resistance zone and the 200 SMA at 149.60 to extend gains higher.
Oil Range Bound Amid Mixed Fundamental Forces
- EU sanctions on Russia are not expected to impact Russian exports
- US economic data offers mixed signals
- Oil consolidates below $66
Oil prices are holding steady on Monday amid expectations that the latest EU sanctions will have minimal impact on Russian oil supplies.
The EU approved its 18th package of sanctions against Russia over the war in Ukraine, although these aren’t expected to change the oil balance, and therefore the market is not reacting in a notable manner.
The sanctions from the EU followed threats by President Trump last week to impose sanctions on buyers of Russian exports unless Russia agrees to a peace deal within 50 days.
Data on Friday showed that the number of oil rigs operating in the USA fell by two to 422 last week, marking the lowest number since September 2021.
On the demand side, attention is turning to the August 1st deadline. However, US Commerce Secretary Howard Lutnick said he was confident the US could secure a trade deal with the EU ahead of this date. An agreement could help underpin the price and keep oil within the familiar $64 to $70 range over the coming week.
Looking ahead to the week, attention will be focused on oil inventory data as well as US figures on Thursday. Mixed U.S. economic data have complicated the Federal Reserve’s policy outlook and, therefore, the outlook for oil demand.
Improving consumer sentiment and rising inflation highlight the challenges the Fed faces in cutting , particularly given the uncertainty surrounding trade tariffs as well. A more dovish Federal Reserve is better for economic growth and, therefore, the oil demand outlook.
Oil Forecast – Technical Analysis
Oil’s recovery from the 64.00 region faced rejection at the 200 SMA at 68.50, and the price has rebounded lower, breaking below the rising trendline dating back to the start of May and keeping the longer-term downtrend in play.
Sellers are testing horizontal support around 65.50 and below, here 64.00, the mid-point of the descending channel dating back to late 2023 and the late June low. Should sellers take out these levels, 60.00 comes into play.
It would take a rise above the 200 SMA at 68.60 to create a higher high and bring 70.00 into focus.
