Can Italy be saved

EUR/USD

Range: 1.3735-1.3779

Support: 1.3600

Resistance:1.3900

The focus has very much switched from Greece to Italy this week, with bond spreads widening to record levels despite further support in the BTP market from official buyers. We look to be range bound as we await the next European headline which we probably won’t get until 2,30pm (UK time) when the Italian Parliament will vote on last year’s budget plan with the outcome looking to hold the future for Mr Berlusconi. If he fails to get 316 votes from the 630 seat house then a likely no confidence vote could lead to early elections in Italy. Keep an eye on Mr Berlusconi’s Facebook page for now, after he used it to quash resignation rumours yesterday.

GBP/USD

Range: 1.6034 – 1.6069

Support: 1.5900

Resistance 1.6100

Sterling continues to hold onto its gains with a slight safe haven status, with the weight of developments in Europe dominating proceedings. Today we see the release of UK Industrial and Manufacturing output data with the consensus being 0.1% for both. Traders are expecting that bar any further developments in Europe, cable could continue to trade in a range before the Bank of England’s rate announcement on Thursday.

USD/JPY

Range: 77.98-78.11

Support: 77.80

Resistance 78.80

With the G20 meeting now firmly in the rear view mirror and no real comment on the Japanese record intervention just over a week ago, yen has been confined to very tight ranges with EURO/JPY and developments n Europe dominating proceedings. The Japanese will be very aware though of the SNB’s comments and threats re CHF strength as a safe haven play that the yen will be very much the market’s choice if the SNB continue such a strong stance to prevent the CHF from strengthening too much, with measures that the Japanese just can’t compete with. Traders look to play the range here until either the 76.70 or 79.30 levels break.

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