Japan’s ruling Liberal Democratic party registered a convincing election victory, giving Prime Minister Abe a comfortable majority in the lower house of parliament. However, winning the election is likely to be the easy part, as the economy is stumbling and Abe’s economic reforms will face resistance from the upper house. Growth and inflation have not met the government’s target, and the yen has tumbled to around 120 under “Abenomics”, with the BoJ implementing radical monetary easing. Meanwhile, the Japanese Tankan indices were a mix in the Q3 readings. The Manufacturing Index dipped to 12 points, down from 13 points in Q2. There was better news from the Non-Manufacturing Index, improving to 16 points, up from 14 points in Q2. The yen showed little response to these key releases.
USD/JPY posted strong gains early in the Asian session, testing resistance at 118.69. The pair then retracted. In the European session, the pair has pushed higher and broken above the 118.69 line. USD/JPY is steady early in the North American session.
118.69 has switched to support role as the dollar has pushed higher. It could see further activity in the North American session. 117.94 is stronger.
On the upside, 119.63 is an immediate resistance line. USD/JPY ratio is pointing to gains in long positions on Monday. This is consistent with the pair’s movement, as the yen has posted losses. The ratio has a majority of long positions, indicative of trader bias towards USD/JPY continuing to gain ground.