Italian Bunga Blowup & New Premium Insights

Surprising Italian elections results led to a wild day of trading. EUR/JPY dropped by as much as 650 pips in US trading as the voting left no clear winner. The calendar in Asia-Pacific is light so traders may have a moment to sort through the carnage. 2 new Premium trades were added onto EURUSD, USDJPY and GBPUSD, with 1 new trade on AUDUSD, for a total of 7 new trades. We add new trades on yen crosses, EURGBP and commodities on Tuesday.  The STATUS on all trades has been updated. See all in latest Premium Insights.

Italian elections have a polling blackout for two weeks before the vote and that left a considerable amount of uncertainty. Still, the market was fairly confident that Bersani's Centre Left coalition would win and continue to support most of Monti's reforms.

Instead, Berlusconi stormed back to take the most seats in the Senate and Bersani looks to have won a tight lower house vote. Even more surprising was the nearly 25% of votes won by Grilli, who leads the Five Star protest party.

With no party or natural alliance in a position to form a majority coalition, a period of uncertainty followed by another election is likely. But nothing is yet certain and markets despise uncertainty. After touching above 1.33 at the start of US trading, the euro plummeted as low as 1.3047.

The Italian results derailed overall sentiment and yen crosses collapsed. From above 125 at the start of US trading, EUR/JPY fell as low as 118.73. The 55-day moving average at 118.55 finally stopped the massive squeeze.

Japanese policymakers will have woken up to a shock. The initial yen selling on Kuroda's nomination has quickly reversed on risk aversion. The government has yet to face a bout of yen strength and it may want to address it quickly.