The USD/JPY pair is without a doubt the most important pair in my opinion for the session today. This is because the US Presidential elections will be held, and this pair is without a doubt one of the most sensitive to the potential outcome.
As I look through the news services around the world, there seems to be a consensus that president Obama will be reelected. However, as someone who lives in Columbus, Ohio which of course is the heartland of where this entire election will be decided, I can tell you that the election is much, much closer than most Europeans or Asians understand.
Ohio is without a doubt the "Ground Zero" of where the election will be decided. In fact, there is a general consensus that whoever wins this state, will win the presidency. While this is a 100% for sure, it is without a doubt where most of the campaigning is being done over the last couple of days. We literally have millions of dollars thrown at us and advertisements every day in Columbus, and the state of Ohio in general.
Sometimes the market leans in one direction
In this particular pair, you have two currencies that are being worked against by their central banks. Obama has already shown that he is more than willing to start spending money, and with absolutely no control. He also backs Federal Reserve Chairman Ben Bernanke, who of course has the loose monetary policy that we have seen out United States recently. By contrast, Gov. Romney has a long history of cutting budgets, and has stated publicly that Mr. Bernanke will not be returning for another term. If that's the case, a Romney victory would see the US dollar skyrocket in value as the market will trying to get ahead of any monetary policy tightening.
With the Bank of Japan working so hard to devalue the Yen, this could be the catalyst finally to see this pair rise. I have the 80 handle as an obvious four level, and price is currently sitting just above it. With this in mind, I believe that we are simply waiting to see what the election results are.
If Obama does win, this will be an anti-dollar move. However, it is very unlikely that this particular pair will meltdown as the Bank of Japan sits below. However, on the flipside we would see a sudden shift from two competing central banks to one that is eventually going to start tightening again. This would be the perfect scenario for market to start rising. I believe that if Romney wins, we will see the 84 handle in short order. If we can get above that level, I am not only buying this pair, but I'm holding onto it for months if not years.