USD/JPY: How far will this unwinding go before the elections?

FXStreet (Barcelona) – USD/JPY is trading at 117.58, down -0.37% on the day, having posted a daily high at 118.08 and low at 117.44.

The markets are likely to be jittery and unlikely to be too one sided with the events coming up, and a more neutral stance in the Yen looks favorable as we approach the Japanese snap elections and await the outcome of that. The question is for now, where is the neutral zone in this onslaught we have witnessed over the past two-month since October’s rally?

USD/JPY is pressing on within the 117 handle and keeps to the downside while risk aversion buys up the yen and markets continue to shun the greenback on any attempts of a recovery.

Below 118.00 is key and closes here open up further room to the downside towards the November low at 117.23 as support ahead of strong support in the high 116 area. If, however, there is a turnaround of events in the lead up to the elections, the upside looks somewhat limited at the moment, as noted by Jim Langlands at FX Charts. “ The dailies point increasingly lower. The initial resistance will be at 118.65 (minor) and then at 119.00. I don’t really see us back above here today but if wrong, we could see a squeeze towards 119.60 where the 200 HMA would provide a cap.