The risk-on sentiment that has been evident across the board was largely driven by the developments in Italy over the weekend, where lawmakers finally agreed on the formation of government. So much so that even expectations of another interest rate cut from the ECB failed to encourage the bears to slowdown the ascent by the pair. Technically, resistance levels are seen at 1.3108, the 62% retracement of the recent sell-off and then at 1.3202, the April 16 high. Moody's affirmed Italy at Baa2, outlook negative and said that it will verify new Italian government's ability to pursue reforms and the situation remains difficult. As a guide, the government includes four technocrats and Alfano, a close ally of Silvio Berlusconi and secretary of their centre-right People of Liberty, was named the deputy PM.
GBP/USD
GBP/USD also trended higher on Monday and the pair remains on track to make a test on the 50% retracement of the January to March sell-off at 1.5606. A closing break above would indicate scope for further upside to the February 13 high at 1.5689. In terms of macroeconomic commentary, according to Hometrack, property in London is being bought quicker than any time since October 2007, when the market hit its peak before the financial crisis. Elsewhere, BoE's McCafferty said he sees improved outlook for growth and sees UK credit conditions and export outlook gaining traction.
USD/JPY
USD/JPY is seen lower this morning, as market closures in Asia encouraged further bout of profit taking. Nevertheless, the price action remains in a bullish channel, but a closing break below 97.37, which is the 62% retracement of the advance from mid-April would signal extension towards the April 16 low at 95.80. In terms of macroeconomic commentary, IMF lowered its 2013 Asia-Pac growth forecast to 5.7% from 5.9% and said China remains vulnerable to growth slowdown, according to the IMF Asia and Pacific regional economic outlook. Of note, mainland Chinese markets are closed until May 2 for the golden week holiday and Japanese markets were closed today for Showa day.