As noted earlier, bids in the 84.00 region in USD/JPY may force EUR/JPY sales to spill ove3r to the EUR/USD leg of the cross. That has been the case in early afternoon trade as EUR/USD slumps to 1.2685 and EUR/JPY to 106.65.

An earlier dovish article regarding the ECB, suggesting that the Bank will continue to provide unlimited funds to European banks on both a weekly and three-monthly basis through the end of the year. The article also said the ECB remains concerned about reliance of many EU banks on ECB funding.

1.2590/1.2610 is a very important support zone for EUR/USD but will likely not come in to play this afternoon ahead of important US data tomorrow like ISM.

EUR/JPY has come off sharply in the last hour, falling just over a yen at this stage. The selling intensified at the 15:00 Fixing, Sending us down from the 107.15 area to present levels around 106.70.

Month-end ain’t for the faint of heart…

If there is more EUR/JPY selling to do and if central banks continue to buy around 84.00 than EUR/USD will bear the brunt of the movement…That pair is back below 1.2700 after peaking at 1.2744 an hour ago…guess there were some offers around after all…

The daily EUR/JPY chart looks quite bearish still and with no sign of a bottoming formation, another test of the recent 105.50 low looks to be on the cards.

Stocks are giving back much of the gains made on Friday, now down 0.8%. Bond yields continue to slide as well, down to 2.55% from 2.60 earlier in the day and 2.65% at Friday’s close. Risk aversion is in full flower once again.

EUR/JPY trades at 107.45 and EUR/CHF at 1.3000, both sharply lower on the day but slightly above earlier intraday lows.

EUR/USD has fallen back to 1.2700 as EUR/JPY pressure takes center-stage. Next support is 1.2675, the low seen after the Bernanke speech hit the wires Friday morning. Stops have been rumored in the 1.2660/65 area for the last several days, but they seem to be protected by central bank buying on dips…

EUR/JPY has shed about 2-JPY since the BOJ called an emergency meeting to serve the market a very thin gruel. 107.00 is very important support for the cross near-term.

As Sean noted earlier, several high-profile hedge funds are said to have buying interest not far below the market, starting around the 84.50 level.

Solid offers are reported between 1.2795/1.2810 and fresh bids are also noted this morning around 1.2700 suggesting that this may well be the trading range for the Asian session at least.

The riskier side of the equation would nevertheless seem to be for further gains, depending on what effect the BoJ meeting has on EUR/JPY. Heavy stops are reported above 1.2830 which implies that any move higher may gain additional momentum as it goes.

Nobody seems too sure what PM Kan can do to turn the Yen-tide around but it seems many don’t want to hang around and find out. It’s Friday, time for a rest not a fight. JPY longs are taking their profits and leaving the building. EUR/JPY is at a fresh session high of 107.67 and the other JPY crosses are following suit.

We shouldn’t be surprised by early movements in the so-called risk trades seeing as it is Friday and most traders seem to want to be square or short heading into the weekend.

EUR/JPY and EUR/CHF have fallen 35 and 25 pips respectively in early trade and whilst definitely nothing conclusive, it does give an indication of the way traders are tending.

The previous low at 107.30 had the potential to act as a strong resistance level but that has now been negated by the solid consolidation above there.

Next major technical resistance in EUR/JPY is 109.00, which is also a previous low and the 38.2% retracement of 114.70/105.50.

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