THE YEN LOSES GROUND AFTER ABE’S PARTY WINS ELECTIONS
The EUR/USD dropped on the background of a stronger US dollar as approval for the federal budget for next year came through. Budget approval increases the probability of the promised tax reform which is anticipated to lead to economic growth for the US. At the same time investors are keenly eyeing the situation in Spain where Prime Minister Rajoy is demanding for more power in order to displace the leaders of Catalonia. This political crisis will remain in the market’s focus and may put pressure on the quotes for the pair.
The Japanese yen is falling against the USD following the results of the parliamentary elections in Japan where the party of current Prime Minister Shinzo Abe won. The yen reacted to the idea of more monetary stimulus as the current economic course known as Abenomics is likely to continue. The flash manufacturing PMI in Japan is due to be published tomorrow at 00:30 GMT and that may lead to increased volatility.
USD/CAD quotes resumed growth after some correction. Negative for the bears came from the report on wholesale sales in Canada which in August increased by only 0.5% against the 1.1% expected and 1.7% in July. Investors are waiting for the Bank of Canada’s monetary policy statement on Wednesday before making any significant moves. The last rate hike by the country’s central bank resulted in a sharp appreciation of the Canadian dollar. After confident growth of the previous days, there is an increased probability of a technical correction and the pair rolling back.
The EUR/USD price fell below 1.1750 and tested the support at 1.1730. Breaking through this level may force the bears to pull the price further down to 1.1620 or even to 1.1550. On the other hand, after a significant descending movement, the quotes may rebound upwards with the potential of growth to 1.1750-1.1770 or the SMA 100 on the 15-minute chart.
The USD/JPY price is trying to break through and fix above resistance at 114.00. In case of success, the next targets will be located at 114.70 and 115.00. In case of rollback and crossing the SMA 100 on the 15-minute chart, we may see further price drops to potential targets near 113.00. The current trend is positive and in order to change it, the quotes need to fix below the 113.00 mark.
The USD/CAD price is consolidating after a confident upward movement. To maintain the positive impulse, quotes need to overcome the resistance level at 1.2665. Immediate targets in this case will be at 1.2800 and 1.3000. We do not exclude the start of a decline but in order to fall, quotes need to overcome the local low mark near 1.2607.