[Japan Upper House Election Shock] Yen Strengthens at Week’s Start as Political Risk Adds Volatility

✅ Market Overview at the Start of the Week

The weekend’s Upper House election results showed the LDP-Komeito coalition lost its majority, raising political uncertainty in Japan. As a result, the new trading week opened with yen buying dominance.

• USD/JPY:
  Gapped down from around 148.50 to 147.79 at the open.
  Brief rebound to the mid-148 range, but slipped back below 148, highlighting heavy resistance.

Key Background Factors:

• Political uncertainty in Japan triggered temporary yen-buying pressure, but foreign investors have not made major position shifts.
• Unwinding of accumulated yen short positions from last week continues; normalization may take time.

✅ How Overseas Investors View It

Short-Term Outlook:

• Yen-buying adjustment remains dominant.
• Few expect a sustained yen appreciation trend; most are seeking entry points to resume yen selling.

Medium-Term Outlook:

• Weakening of the ruling coalition’s base could become a long-term bearish factor for the yen, potentially fueling yen-selling pressure in the future.

Political Scenarios:

• Attention on PM Ishiba: Internal LDP pressure could force his resignation.
• Opposition remains divided; policy coordination likely to take time.

Bottom Line:
Japan’s political environment will likely stay fluid, adding volatility risk to the market.

✅ Key Events Today

Economic Data:

• Hong Kong CPI (June)
• Canada Industrial Product Prices (June)
• U.S. Leading Economic Index (June): Forecast -0.3% (Previous -0.1%)

Events:

• FOMC Blackout Period → No Fed official speeches

Corporate Earnings:

• Verizon, Domino’s Pizza, among others

Geopolitical Risk:

• Possible meeting between Putin and Trump in China this September, raising concerns over U.S.–China–Russia dynamics heading into the fall

✅ Technical Levels & Trading Strategies

USD/JPY (Dollar-Yen)

• Current: Around 148.00, with yen strength and dollar rebound in a tug-of-war
• Support: 147.50 → 147.00
• Resistance: 148.80 → 149.20

EUR/USD (Euro-Dollar)

• Current: Around 1.1680, in a narrow range
• Support: 1.1650
• Resistance: 1.1720

GBP/USD (Pound-Dollar)

• Current: Around 1.3380, under pressure from weak U.K. employment data
• Support: 1.3350
• Resistance: 1.3430

USD/CAD

• Current: Around 1.3660
  ✅ Strategy: Maintain buy-on-dip approach

AUD/USD

• Current: Around 0.6520
  ✅ Strategy: Continue sell-on-rally stance

✅ Key Themes for Today

• Political uncertainty after Japan’s Upper House election → Market watches for timing of yen-selling resumption
• U.S. Leading Economic Index → Gauge the dollar’s underlying strength
• No Fed speeches due to blackout period → Market focus remains on data and political developments