EUR/JPY surges through 131.00 handle, hits 1-1/2 week tops

   •  Extend last week’s goodish rebound from 7-week lows.
   •  Villeroy’s comments provide a lift to the shared currency.
   •  Fading safe-haven demand supports the strong up-move.

The EUR/JPY cross built on last week's solid comeback from 7-week lows and jumped back above the 131.00 handle during the early European session. 

The cross stalled its recent slide from over 2-month tops touched in April and found decent support near the 200-week SMA. The cross continued gaining positive traction at the start of a new trading week, marking its fourth consecutive session of strong gains and was being supported by fading safe-haven demand. 

The shared currency got an additional boost after the ECB's Governing Council Member François Villeroy de Galhau said that the end of net asset purchases is approaching and that the first hike will come in quarters, not years.

Adding to this, possibilities of some short-term trading stops being triggered on a move beyond the 131.00 handle seems to have further aggravated the up-move over the past hour or so. With today's strong up-move, the cross has now gained in excess of 170-pips over the past four trading session and in absence of any major market moving economic releases, remains poised to extend the bullish trajectory.

Moving ahead, this week's important EZ macro data, including the flash GDP growth figures and the final CPI print, will provide some clues over the ECB's next policy move and eventually provide some meaningful impetus.

Technical levels to watch

Immediate resistance is pegged near the 131.60-65 region, above which the cross is likely to head towards reclaiming the 132.00 handle before eventually aiming to retest the very important 200-day SMA hurdle near the 132.35 region.

On the flip side, the 131.00 handle now seems to protect the immediate downside, which if broken might prompt some fresh selling and drag the cross back towards mid-1.3000s.