The USDJPY unexpectedly challenged 2018 highs above 113 towards the end of September, in spite of the Dollar index declining towards its lowest level in three months during the same period and as emerging markets remain rattled by external uncertainties leading to fears that some are suffering from a currency crisis.

This shift in weakness for the Japanese Yen didn’t get the attention it deserves in the headlines due to the ongoing focus around global external uncertainties, but it is a significant surprise that the Yen dropped to milestone lows at a time when you would usually expect the Yen to remain a safe-haven asset for investors.

I do not think the trend of Yen weakness is a deliberate measure from officials in Japan, because the Dollar has also clobbered the Swiss Franc and Gold during the same period of Yen weakness.

It would not be a surprise if investors are proactively selling the Yen on concerns that Japan could be the next target of President Trump for trade tariffs. Reports have circulated since early September that the Trump Administration is considering directing the trade rhetoric towards Japan while Washington remains in deadlock with Beijing on the same narrative, and that President Trump might have used the recent visit of Japanese Prime Minister Shinzo Abe to the United States as an opportunity to push the trade agenda.

From the Bank of Japan’s perspective, policymakers are likely to be content to see an emerging trend of Yen weakness because it has been widely speculated that officials would prefer to see the return of a weaker Yen.

Hesitance from the central bank to lift the monetary policy outlook for anticipation of higher Japanese interest rates over the long-term remains a pull towards maintaining a negative bias on the Yen over a longer run. However, I would keep an eye on whether the safe-haven appeal of the Yen could return in the lead up to the US mid-term elections in November.

We have seen time and time again in recent history, and specifically when there is market uncertainty around political risk that investors are incredibly loyal to the Japanese Yen and I am not buying into the near-term price action suggesting that the Yen has lost its safe-haven status.

Loyal investors of the Yen might also consider potential selling positions when the USDJPY rallies.

I would expect the Yen to fluctuate if the Trump Administration redirects attention later down the road towards talking down Greenback strength.

The technical outlook suggests that 113 in the USDJPY remains a key point of interest for traders.

I would personally like to see the pair close above this level on a monthly basis, before buying into the trend that more Yen weakness is upon us.

The weekly timeframe also suggests that 113 in the USDJPY will continue to act as a barrier to prevent the pair from extending even higher in the short-run.

Ambitious USDJPY investors might overall be tempted to price in an eventual return to 115 in the pair if the USDJPY can conclude above 113 on a monthly basis.

November will likely provide the heaviest round of political risk in financial markets this year, considering that this is when the US mid-term elections will take place.

If the USD sells off on comments from the Trump Administration that the Dollar is too strongly valued, or that the mid-term elections outcome might provide a stumbling block to President Trump implementing his America First agenda, this is where investors will likely consider bearish positions in the USDJPY.