12.17.12 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

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3067	1.3130	1.3160	1.3242	1.3284
USD/JPY	82.84	83.13	83.95	84.35	85.00
GBP/USD	1.5999	1.6074	1.6140	1.6178	1.6200
AUD/USD	1.0460	1.0505	1.0540	1.0585	1.0625
XAU/USD	1660.00	1688	1695	1704	1721
OIL/USD	83.50	86.00	86.95	87.00	88.00