USDJPY seeks to reclaim 146.00 amid rising interest rates and US midterm election concerns

In Asia on Wednesday morning, the USDJPY rises considerably from a two-week low at 145.70-80. Consequently, the Yen pair reverses its three-day decline in response to the cautious market sentiment.

Despite this, optimism is dwindling as the most recent information from the US midterm elections indicates government gridlock. In conjunction with the Republican demand for an increase in the debt ceiling, this intensifies the fear of rising interest rates.

The deteriorating coronavirus situation in China contributes to both the current risk aversion and the USDJPY exchange rate. China reports the highest number of new COVID cases in six months on November 8, with 8,335 new cases reported, while Guangzhou's second district remains quarantined.

It should be noted that Japan recorded a significant Current Account surplus for the month of September, but failed to recognize the sharpest decline in the surprise for the first half of the current fiscal year (FY) since 2008. In recent days, speculations of intervention by the Bank of Japan (BOJ) and the recent softening of US data joined mixed Fed fears to boost US Treasury rates and USDJPY prices.

As a result of these factors, the yield on the 10-year US Treasury note regains upward momentum and surpasses 4.14 percent, while the yield on the 2-year note climbs somewhat and approaches 4.62 percent. It should be noted that despite Wall Street's three-day rally, US stock futures reported minor losses while Asia-Pacific markets closed in the red.

Ahead of Thursday's release of the US Consumer Price Index (CPI) for October, USDJPY traders may find political and covid updates entertaining. Purchasers of USDJPY near 145.50 are protected by the 50-day simple moving average, but the recovery requires confirmation from a three-week-old resistance line near 147.45.