Forex: EUR/JPY rallies to 125.00

Thanks to euro strength, the EUR/JPY is being able to the keep upside steady after the almost 200 pips gained right at start of the week, to as high as 124.92. The Japanese Yen was been retracing part of the losses made in reaction to reports (not confirmed yet) that PM Abe will nominate dove ADB President Kuroda to lead the BoJ, but the market is moving agian now. The Yen is falling again and the Euro keeps strengthening, pushing the EUR/JPY to new daily highs, above 125.00.

Italian elections are the main focus of the day. The voting process will be closed at 14:00 GMT and first polls should arrive around 15:00 GMT. “A Berlusconi victory in both chambers – the chamber of deputies and in the Senate – would constitute the worst case scenario for the euro, which we only consider to be marginally likely though”, wrote Commerzbank analyst Carolin Hecht. The most likely scenario and greatest relief in the EUR/USD would be an alliance between the centre-left Pierluigi Bersani and Mario Monti.

“We note that the market is now trading below its 20 day ma for the first time since November, this is located at 124.87 and offers additional short term resistance. It is on the defensive and will require a rapid rebound and break higher through the top of the flag – this is currently at 125.21”, wrote Commerzbank analyst Karen Jones, pointing then to key resistance at 127.71/93, the 6th February high and the April 2010 high.