JPY: Political Risks In Europe Eyed

EUR/JPY lost altitude Wednesday as fresh political uncertainty emerged in the Eurozone after Italian ex-PM Renzi pulled his party from PM Conte's gov't amid disagreement over the post-pandemic recovery plan. Renzi's announcement left the gov't without parliamentary majority, triggering frantic attempts to resolve the crisis without the need to call a snap election.

• Meanwhile, Germany's CDU will elect its new leader and the likely successor to Cll'r Merkel on Saturday, with betting markets favouring the most conservative contender Friedrich Merz in what may prove to be a tight race.
• Worth noting that a market contact flagged EUR/USD demand from a macro account.
• EUR/JPY 1-week volatility has inched higher today, moving away from its lowest levels of 2021 printed Wednesday.
• Spot last sits at Y126.39, 9 pips better off as we type. Jan 7/Mar 1, 2019 highs of Y127.49/50 provide the initial bullish target and a break here would open up the 0.618 projection of May - Jun rally from Oct 30 low at Y127.88. Bears keep an eye on the Y126.00 area, with the rate struggling to stage any sustained move below there since the beginning of Dec 2020. A clean break under that round figure would turn focus to Dec 16 low of Y125.71, the worst level since Dec 1.
• EZ & Italian industrial production reports are due today, with ECB speaker slate featuring Pres Lagarde & Villeroy.