FX markets take a pause ahead of elections

The dollar is again under pressure in early European trading as equity markets trade under pressure. Oil futures are now trading below $60 per barrel, with rumours circulating that the BoJ will reject a further stimulus package to stimulate the economy due to the collapse in oil prices.

The Japanese elections will take place this weekend with voting to close on Sunday at 11 am GMT. The total numbers of seats available to drop by 5 to 475 as media polls suggest this election will have the lowest turnout in Japanese history.

-  A failure to secure 238 seats would mean that the LDP has failed to secure a majority in the lower house and PM Abe would need to resign.

-   266 seats are needed to give the LDP an absolute majority and govern the house

- If the LDP manage to secure 326 seats and improve on the seats it held before the election announcement, it would mean that the ruling party will be able to pass any law that would signal to the markets that further stimulus to reflate the economy is certainly possible.

In Asia, the NZD saw further gains as consumer confidence came in much stronger at 126.5 versus the November reading of 121.8 as the markets continues to anticipate that China will be lowering the 2015 GDP target highlighted by the release of weaker industrial production data overnight that recorded a 7.2% outcome versus the 7.5% expected.

I’m expecting equity and commodity markets to dominate FX proceedings today as the data releases from across the pond consist of the producer price index along with the university of Michigan consumer sentiment survey.

EUR/USD

Supports 1.2340-1.2285-1.2230  | Resistance 1.2495-1.2530-1.2600

USD/JPY

Supports 118.00-117.45-117.20  | Resistance 119.25-119.60-120.00

GBP/USD

Supports 1.5640-1.5620-1.5540  | Resistance  1.5740-1.5785-1.5820