U.S. election could see USD/JPY to 140.00 or 160.00
Repeats with no changes
Nov 4 (Reuters) -The most bullish and bearish outcomes for the U.S. election could see USD/JPY reach 140.00 or 160.00 according to Societe Generale's chief economist.
Kit Juckes says the two most equally likely outcomes for the U.S. election are a Republican clean sweep (house and senate) and a Harris win without a clean sweep. These are also the most bullish and bearish outcomes for the USD respectively. Also, these are the most and least bearish for the Treasury market, which is clearly nervous (as can be seen by the synchronised move higher in yields and in gold prices).
That leaves Japan's JPY in an uncertain state says Juckes. A Trump win and clean sweep could see USD/JPY head back towards its highs above 160.00. But given the dire mood in the Treasury market, a Harris win without a clean sweep would give the JPY a lift with potential for USD/JPY to head back to subsequent lows by 140.00. That's a much wider range than the outcome would be in European currencies, for example.
FX option markets are primed for extreme volatility in all related currency pairs as demonstrated by implied volatility, but not yet one that moves USD/JPY an initial 10 big figures.
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1-week expiry FXO implied volatility https://tmsnrt.rs/4fxoniQ
(Richard Pace is a Reuters market analyst. The views expressed are his own)
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