Ella 
The EUR/JPY cross rebounded from a two-week low hit during the Asian session last Friday and moved back above the 173.00 round-number mark in the final hour. Spot prices now appear to have halted their decline from a sharp correction from the 175.40-175.45 area, or the highest level since 1992 set on Thursday, as fresh selling emerged around the Japanese yen (JPY).
Overnight market reaction to speculation that Japanese authorities may have intervened in the foreign exchange market to boost the national currency was quick to dissipate in the absence of any concrete evidence of intervention. This, coupled with the underlying strong bullish sentiment in the stock market, weakened the safe-haven function of the yen and was seen as a key factor in attracting new buyers for the EUR/JPY cross on the last day of the week.
Nonetheless, the uncertainty surrounding the composition and makeup of the new French government may discourage traders from making aggressive bullish bets on the EUR/JPY. Apart from this, bets that the Bank of Japan (BoJ) may raise interest rates and that Japanese authorities will eventually intervene to support the yen will also curb any meaningful appreciation in the EUR/JPY cross, so bearish traders need to be cautious.
In fact, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said on Friday that it is very important for currencies to fluctuate in a stable manner that reflects fundamentals and that he is ready to take all possible FX measures. In addition, Japan’s Finance Minister Shunichi Suzuki reiterated that rapid FX fluctuations are undesirable. Therefore, it would be prudent to wait for strong follow-through buying before positioning for the resumption of the recently established uptrend.
