EUR/JPY looks to be consolidating gains above 161.00. From a low of 160.20/25 in early Sydney-Wellington trade, the cross surged to as high as 161.40/45 on the DJIA rally Friday and expectations of a rally on the TSE and other Asian bourses this morning. It did back off a bit thereafter but retracement lows have been limited to the high-160 area. It has since edged back up to the 161.00, and recently up again at 161.15/20 on the back of the fresh leg up in the Nikkei. The Nikkei now looks to be consolidating gains above 15K. With the Nikkei more buoyant, EUR/JPY is likely to remain better bid. Stops seem to be building above 161.50 now though resistance is eyed ahead of 162.00.

EUR/JPY continues to rally into early Sydney trading after bouncing off 162.11 this afternoon in NY with the cross reaching 163.28 this afternoon. The gains are being mostly driven by fresh highs in the EUR/USD above 1.4850 with the EUR bund yield spread over 2-yr US bonds at 54 bp and the highest since 2004, and helping to underpin the EUR performance. Stops above a barrier option at 1.4830 helped fuel the gains. The fact that the DJIA closed back above the key 13,000 level is also helping fuel the broad gains on JPY crosses on diminished risk aversion. Also, according to MarketWatch.com, yet another oh-so- convenient rumor of an emergency Fed rate cut rumor has surfaced and was behind the stock market recovery. Yet, there was no sign of such a stance either in the Fed minutes today or in recent comments. It increasingly appears that the rumor is being fed to the market in an attempt to lift stocks. Certainly, credit conditions are deteriorating again with issuance and funding pulled for Quebecor, Exportfinans and Chrysler today.
EUR/JPY resistance is at 163.40 and the session highs seen in London with a break targeting 164.30.