USD/JPY on its knees at key support, Japan officials on guard

USD/JPY is currently trading at 103.24, pressured in the open as US equities lead the way.

The pair has lost over 2% during the US elections as, either way, the yen was favoured whether it be a Blue wave or just a Blue ripple. 

A Blue wave, or a Biden White House controlling both the House and Senate, would be expected to weigh heavily on the US dollar.

In such a scenario, the greenback would give up the majority of any safe haven qualities over to the yen as the preferred choice among investors. 

A Blue ripple, or a Biden White House and a GOP Senate, would be expected to be more corporate-friendly and therefore supportive of the US stock market, thus, again, negative for the US dollar. 

Considering the complexities of the incumbent president contesting the election, the spread of the coronavirus and ongoing geopolitical matters, some of the money is likely to be on the sidelines and parked, which is again, supportive of the yen. 

Yen strength under scrutiny 

Indeed, the Japanese yen has been getting a lot of attention throughout the US elections which are potentially distressing for the Japanese officials, especially Finance Minister, Taro Aso, who has said Japan will need to respond to currency market moves if results of the US presidential election cause a sudden spike in the yen.

Aso first made the remarks when asked about market speculation that the safe-haven currency could spike if Republican nominee Donald Trump won the presidential race due on Nov. 8.

“Stability in currencies is always important,” Aso told reporters after a cabinet meeting.

More recently, the markets heard from Yoshihide Suga, who repeated this message and also gratulated Democrat Joe Biden on his election as the next US president, expressing a desire to bolster bilateral ties.

The Japanese yen has been in free fall despite the notion that Biden would win the White House. 
The problem for the yen is that the equity markets have rallied on the prospects of the GOP holding the Senate which is seen for corporations. 

More on this here:

S&P 500 Weekly Forecast: Stocks focussed on the battle for the Senate

USD/JPY levels

The yen has taken the US dollar to below the 104 level which was a critical support area.

It can be expected to test this area as resistance from where bulls may seek to load-up again at a discount towards a run to test the 2020 lows of 101.18.