HOW THE MORITOMO SCANDAL IS LIKELY TO AFFECT USD/JPY RATES

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The US dollar and the Japanese Yen cross rate popularly abbreviated as USD/JPY has failed to reach its centrality even on its 26th-day. However, after a stiffly trading, the gopher also known as the USD/JPY, an impermanent incentive may have been found. The Moritomo scandal involving Japan’s Prime Minister Abe and the finance ministry may be the spark plug to the trade. According to Nikkei news Asia, the resurfaced drama intimidates the re-election of Prime Minister Abe. Institutions and organizations are optimistic that should the scandal blow up, there could be 100 revision of the USD/JPY. Nonetheless, the gopher is still on a fall-off below 107.095 (Spot at 106.43).

The Moritomo farce widely involves the Finance Minister who bluntly admitted to having altered documentation related to a suspicious land sale. The scandal was aimed at favoring Shinzo Abe’s wife. Moreover, the government of Japan proved that the names of Prime Minister Abe, his wife Akie along with Finance Minister Taro Aso had been phased out from official documents of high-end officials. Finance minister Aso is holding his subjects liable for the elimination of the names. Still, the spotlight is on Prime Minister Abe who has forewarned that should he and his wife be linked to the reemerged drama; he would resign.

In addition to that, there have been reports which suggest that Finance Minister Aso will fail to attend the G20 meeting and propagate developments on Moritomo Gakuen could cause the JPY monthly low to breach. Up to now, the Japanese Yen is still on the March range of 105.25-107.20. Subsequently, if Abe fulfills his promise to end his political interest as Japan’s longest serving Prime Minister, the monthly low would undoubtedly break.

According to Ichimoku Cloud technical study, traders have confirmed that the USD/JPY trade has depreciated, trading below the cloud. Since January 10 during the Kijun-sen also known as the 26-period midpoint, the prices rested under 112.50, and in early March traded to as little as 105.20. President Trump’s election intensified the USD/JPY trade to 118.66 by mid-December compared to the 105.20 which was the closing peak in October 2016. This deflection happened in less than two months.

As per Ichimoku Cloud technical study, a close above 107.095 may indicate that a deviation may be occurring. However, for now, the drive focuses towards the 100% extension lower at 104.20 superseded by the low at 100 in September 2016. Considering insights from IG UK Client Positioning, the USD/JPY prices may continue to fall. Reason being, traders are more net-long as the days go by giving the clients more solid USD/JPY debatable trading bias.

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