European FX: Majors Close Just To The Upside

In spite of trading lower for much of the session, the pair settled in minor positive territory after staging an impressive rally after going through the ECB fix (left hand side fix) at 1315GMT and then the NY cut at 1500GMT. In terms of EU-specific commentary, Italy’s former PM Berlusconi said he has agreed on an electoral pact with the rightwing Northern League. However, reports citing Maroni who is the head of the Northern League indicated that Berlusconi will not to be Italy Premier candidate. According to opinion polls, Mr Berlusconi’s rivals -- the centre-left Democrats and their leftwing allies -- are heading for victory in the February 24-25 elections. In terms of technical levels, supports are seen at 1.2996 and then at the 55-DMA line at 1.2988. On the other hand, resistance levels are seen at 1.3102 which is the 30-DMA line and then at the 21-DMA line at 1.3147.

GBP/USD
The pair settled the session in minor positive territory after intraday option expiries at 1315GMT and 1500GMT prompted broad-based USD weakness. In terms of UK-related commentary, ahead of the upcoming MCP meeting, the Sunday Telegraph wrote that the Bank of England's rate-setters will hold off on further aid for the recovery this week despite the threat of another slump looming over the economy. In terms of technical levels, supports are seen at 1.6022/10 and then at 1.5988. On the other hand, resistance levels are seen at the 21-DMA line at 1.6161 and then at the 21-DMA upper Bollinger level at 1.6294.

USD/JPY
The pair settled the session lower, driven by touted profit taking and unconfirmed market talk of a large 1-month volatility trade going through, 1m implied vols trades at 9.81 last (highest level since April). Japanese PM Abe has renewed his pressure on the BoJ to play a more assertive role in the economy's recovery, raising the adoption of his proposed 2% inflation target by the central bank yet again. It was also reported that Japanese Ministry of Finance will sell more than JPY 5trl of new bonds to fund economic stimulus and that the new bond issuance for fiscal 2012/13 is set to top JPY 50trl. In terms of technical levels, supports are seen at 87.58/26 and then at 87.00. On the other hand, resistance levels are seen at 88.38/48 and then at 88.52 which is the 50% retracement of the 2009-11 move lower.