USD/JPY surges to new monthly highs above 113.70, returns to mid-113s on DXY fluctuation

• Republicans so far perform better-than-expected in midterm elections.
• Market volatility rises as markets assess the exit polls.  
• US Dollar Index makes a sharp U-turn after falling below 96.

The USD/JPY pair slumped below the 113 mark in the early Asian session as the early midterm elections results weighed on the greenback. However, with Republicans winning key Senate races and Democrats struggling to steal House seats, the USD gathered strength and lifted the pair to a fresh monthly high at 113.80. As of writing, the pair was trading at 113.60, adding 0.15% on the day.

According to the latest available info on CNN, Republicans have picked up only four of the 23 seats needed to take control of the House of Representatives. Additionally, FiveThirtyEight's probability of Democrats winning the House fell below 55% compared to the initial forecast of 90% to reflect the poor performance of Democrats so far. Nevertheless, Fox News still predicts Democrats to have the majority in the House when it's all said and done.

On the other hand, Republican challengers won their respective Senate races in Florida and Indiana. The US Dollar Index, which fell to 95.90 earlier, advanced to a daily high near 96.50 before losing its momentum and was last seen down 0.07% on the day at 96.20.

Meanwhile, the Bank of Japan (BoJ) board member Funo said that inflation remains weak in Japan despite the expansion in the economic activity and a tightening labour market. "The BoJ's forward guidance indicates it will not whittle down powerful monetary stimulus for the time being," Funo added.

Technical levels to consider

The pair could face the first technical resistance at 113.90 (Oct. 8 high) ahead of 114.50 (Oct. 3 high) and 115 (psychological level). On the downside, supports are located at 112.95 (daily low), 112.60 (50-DMA) and 112 (psychological level/100-DMA).