EUR/USD Due For Yet Another Volatile Week

The pair is due for another volatile week, this time market participants will get to digest the reports over the weekend which indicated that Italian PM Monti is ready to step down. AP reported that the announcement came after Monti met with Napolitano at the presidential Quirinal palace for more than an hour. Already Friday, Monti had held talks with parliamentary political leaders, including Angelino Alfano, of Berlusconi's right-wing People of Freedom (PDL) party.

At the same time, Berlusconi reportedly held talks with former coalition allies the Northern League, a formerly separatist party, to try to agree on backing a single candidate. Crucially, this week sees both Italy and Spain tap capital markets, with demand for respective obligations risk being undermined by the latest political scuffles. In terms of technical levels, supports are seen at 1.2878, 1.2839 and then at 1.2827. On the other hand, resistance levels are seen at 1.3000, 1.3040 and then at 1.3060.

GBP/USD
The pair is set to remain highly correlated to risk on/off sentiment, which continues to be driven by troubles in the eurozone and also “fiscal cliff” talks in the US. However, the last week’s press conference which in turn prompted speculations that the ECB may cut rates again in H1 of 2013 and consequently weighed on the pair may now act as a support for the pair (by-product of yield differentials). In terms of technical levels, supports are seen at 1.5975/62 and then at 1.5920. On the other hand, resistance levels are seen at 1.6056, 1.6131 and then at 1.6140.

USD/JPY
The pair is set to remain supported by expectations that the opposition leader Abe, who is widely expected to win elections in mid-December, will encourage the central bank to conduct aggressive policy easing actions. In terms of technical levels, supports are seen at 82.05, 82.00 and then at 81.79. On the other hand, resistance levels are seen at 82.75/84 and then at 82.94.