EUR/JPY tests the previous high at 164.90 after rejection at 166.00

• The Euro pulls back from post-election highs as the Yen recovers.
• The political uncertainty in Japan puts BoJ tightening plans into question and will weigh on the Yen.
• Later this week, Eurozone GDP and CPI data might boost hopes of a large ECB cut and add pressure on the Euro.

The Euro has failed to find acceptance above 166.00 earlier today and has given away gains. The Yen has trimmed losses as the market digests the results of Japan´s elections and the pair has retreated to rest support at last week’s high, at 194.90.

The Yen dropped across the board during the early Asian season on Monday, weighed by the defeat of the ruling coalition in the Japanese elections. The hung parliament coming out of the elections opens an uncertain period in the world’s fourth-largest economy, leaving support for the BoJ’s monetary tightening plans in the air.

The Bank of Japan is meeting this week and, in the current context, they are widely expected to leave interest rates unchanged. This is likely to keep Yen's recovery limited.

The Euro, however, has weaknesses of its own. German GDP is expected to have contracted for the second consecutive quarter, weighing on the region’s growth.

If these figures are confirmed and are accompanied by a weak inflation reading speculation about a large ECB cut in December will increase, bringing the Euro lower across the board.