Position adjustments ahead of today's U.S. ISM Manufacturing Index release and the midterm elections are likely to drive dollar-yen movements. The market is expected to assess U.S. interest-rate trends, the battle around the ¥158 level and potential downside levels.
During New York trading today, dollar-yen movements are expected to be driven by position adjustments ahead of the ISM Manufacturing Index release and tomorrow's U.S. midterm elections. With uncertainty surrounding the election and concerns over fiscal policy, dollar-yen is expected to be prone to swings in either direction depending on U.S. interest-rate movements.
The market expects the U.S. ISM Manufacturing Index to come in at 54.6, a slight increase from 54.5 the previous month. New orders, employment and prices paid will be key points of focus. Confirmation of an improvement in business sentiment could lead to higher U.S. rates and stronger dollar-buying pressure. Conversely, a slowdown in manufacturing activity or deterioration in employment indicators could lead to lower U.S. rates and dollar selling.
The Federal Reserve left its policy rate unchanged at 3.75–4.00% at last week's meeting. This week, the ADP employment report, ISM Services Index and October employment report are due to be released, making this a period for reassessing the outlook for monetary policy. Governor Goolsbee is also scheduled to speak, with attention focused on his policy views.
The U.S. midterm elections will be held on the 3rd, with the allocation of seats in the House and Senate a key focus. While the Democrats could control the House, the balance of power in the Senate remains uncertain. Depending on the election outcome, the feasibility of fiscal policy implementation and U.S. Treasury yields could be affected. Coordination between Japanese and U.S. authorities and concerns over intervention also remain. Dollar-yen is expected to face resistance at ¥158.60 and ¥158.95, while downside levels are seen at ¥156.80 and ¥156.08.