The USD/JPY currency pair broke above its sideways pattern in Tokyo. From 146.40, the asset went up in Tokyo. Before the US midterm elections, investors are being careful, so the risk profile is getting worse.

The US dollar index (DXY) is up to 110.40 because people are afraid to take risks. S&P500 futures have dropped as risk appetite declines. The yield on a 10-year US Treasury note went up to 4.23 percent after Richmond Fed President Thomas Barkin said things that were too hawkish.

One person in charge of making decisions is against slowing the rate of rate hikes. The current interest rate is about 4.80%, and there will be some small rate increases shortly. Fed Barkin thinks that interest rates will keep going up because inflationary pressures aren’t going away.

Midterm elections favour Republicans. ANZ Bank thinks that the Republicans will have a majority in Congress (55%). At 41%, a House led by Republicans and a Senate led by Democrats are close behind. The same thing could make the economy less stable.

Bloomberg says that Japanese Prime Minister Fumio Kishida will approve an extra $198 billion for the economic stimulus plan, putting pressure on Tokyo bulls. The government “may raise taxes on people who make more than JPY1 billion a year.”

Trade Idea

The risk-on urge may put a ceiling on JPY gains and stop losses from getting worse. This, along with a big difference between how the Fed and BOJ handle money, makes it more likely that USDJPY will be bought on a drop, so bearish traders should be careful.