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FXstreet.com (Barcelona) - After an extended upside this week that was capped at 109.54 high during the Asian session, both the JPY weakness and EUR strength are under consolidation on European hours, allowing the EUR/JPY to fall down below the 109.00 mark to 108.70, for now, becoming flat on the day.

Trading ahead of the Dec-16 election in Japan and expectations of a much more dovish BoJ afterwards, markets are selling Yen agressively. In Europe, the EZ finance ministers approved the ECB supervisiory oversight powers over up to 200 eurozone lenders, from 2014, paving the way for direct recapitalization of troubled banks in the future. Also important for investors was Fed's already expected decision of extending QE3 from $40B to $85B a month, resuming MBS purchases of $40B a month and $45B of Treasury purchases.

The annualized Italian CPI eased from 2.6% to 2.5% in November, as expected. The inflation report in Spain also came according to consensus, easing from 3.5% to 2.9%. In Switzerland, the SNB kept its monetary policy unchanged, defending the EUR/CHF peg at 1.20 and leaving the rate at 0%, while SECO cut its economic forecast for 2013 to 1.3% from the previously estimated 1.4%, maintaining its outlook of 2012 GDP growth at 1%.

UBS analysts are bullish on the EUR/JPY: "The recent sharp rally extends the bullish pattern of higher highs/higher lows", wrote Geoffrey Yu, pointing to significant resistance at 111.02/111.44 and support at 107.27.

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