The USD/JPY pair rose to three-month high of 114.10 in Asia as Yen selling gathered pace following Abe's victory in snap elections.
Abe's victory - Icing on the cake for USD bulls
Japanese Prime Minister Shinzo Abe's ruling party scored a big win in Sunday's election. His coalition has retained its two-thirds "super majority" in the lower house. Though LDP win is not a surprise, still, it puts to rest the fears of change in Bank of Japan (BOJ) mandate.
The outcome of the election is a sort of icing on the cake for USD bulls, given the American dollar was already on the front foot, courtesy of renewed US tax reform hopes and the resulting rise in the treasury yields.
At the time of writing, the pair is trading around 114.00 levels. The 10-year Treasury yield is up one basis point at 2.39%.
Gains capped by geopolitical concerns?
Reports hit the wires in early Asia that US is preparing to put nuclear bombers on 24 hour alert for the first time in 26 years. This clearly represents escalation of tensions between US, North Korea and Russia and could be the reason for the pair's failure to capitalize on the break above 114.00 levels.
USD/JPY Technical Levels
FXStreet Chief Analyst Valeria Bednarik writes, "The pair seems poised to extend its advance according to technical readings in the daily chart, although momentum is still scarce. The chart shows that the price settled well above its 100 and 200 DMAs which stand horizontal and within a tight range around 111.20/40, as technical indicators head north, the Momentum within neutral territory, but the RSI currently at 63. Shorter term, and according to the 4 hours chart, the downward potential is well limited as the price develops well above its 100 and 200 SMAs, but further gains are still unclear, as indicators lost bullish strength, holding anyway within positive territory. An upward acceleration through 113.60, however, could lead to a test of the major resistance area around 114.40, where the pair topped in May and July."
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