Yen Sold Sharply as Abe wins Japanese Elections

U.S. Dollar Trading (USD) the USD was sold as the EUR/USD broke to fresh year
highs above 1.3180. Over the weekend we saw the Japanese opposition win the general
election with promises of aggressive easing to help stimulate the struggling economy.
The Yen gapped higher above Y84 on Monday morning and all the Yen crosses were substantially
higher. November CPI was weak at -0.3% vs. 0.1% previously. Looking ahead, NY FED Manufacturing forecast at -0.5 vs. -5.2
previously. Also FED members Stein and Lacker Speak.

The Euro (EUR) the EUR/USD toyed with resistance above 1.3100 in
the European session on Friday before a decisive move higher to fresh year
highs above 1.3180. EUR/JPY and EUR/GBP are providing a lot of cross
support and some see the major moving to 1.3300 be the end of the year as the
trend continues. The Sterling (GBP) was capped at 1.6200 on Monday morning as GBP/JPY
lifter the major but it is still underperforming the EUR/USD. The BOE is being
quite successful in jawboning the GBP rallies with threats of more aggressive QE
from the incoming Governor Carney. Looking ahead, ECB President Draghi Speaks.

The Japanese Yen (JPY) The main currency in play with a sharp selloff post election
putting the USD/JPY above Y84.30 in Monday. We have seen some mild profit taking as the market
covers the gap back to Y83.50 but the outlook is for more selling once the
profit taking is done. EUR/JPY hit Y111 near year highs as well. Australian Dollar (AUD)
AUD/USD hit
resistance at 1.0580 when the EUR/USD broke higher but traders are very careful
not to get caught long at these levels with a 6 month 1.0600-1.0200 range still
holding. AUD/JPY has broken key resistance at Y88 and is well set to test Y90
in coming sessions.UPDATE Japanese Opposition wins with 2/3 majority.

Oil & Gold (XAU) Gold has been struggling to take advantage of USD
weakness and have failed to reclaim the $1700 level leaving the downside next
to be tested. OIL/USD tracked EUR/USD to $87 and appears to have formed a base at $85 again
for a test higher.

Pairs to watch

EUR/USD to 1.3300 now
resistance broken?

USD/JPY Buy the rumour
sell the fact?

TECHNICAL
COMMENTARY

By Anthony Darvall (TonyD)