Good morning from Hamburg and welcome to our second Daily FX Report this week.

The former European Union Competition Commissioner Mario Monti is rushing to form a new government as soon as possible in an attempt to restore confidence in Italy’s finances as markets offered little relief to the premier.

However, we wish you much success in trading day.

Market Review – Fundamental Perspective

The inability of Europe to contain a regional debt crisis that has started in Greece more than two years ago, led to a surge in Italian bond yields as investors bet on which nation may need financial aid next. Monti, an economist and former adviser to Goldman Sachs Group Inc., will try to reassure investors that Italy can cut a 1.9 trillion-euro debt load and spur economic growth that has lagged behind the euro-region average for more than ten years. The European Commission President Jose Barroso said he is certain that Mario Monti will be able to successfully deal with Italy’s economic difficulties. Monti will focus on improving public finances and boosting the economic growth he said last night. Berlusconi’s People of Liberty party has said it will back Monti’s government, though it does not want him to go beyond implementing the austerity measures already drawn up to balance the budget in 2013.

The EU has increased the pressure on Italy to hasten implementation of the measures, which include raising the retirement age, opening up closed professions and the sale of real-estate assets. The EU also wants additional action to spur growth and trim debt. EU and ECB inspectors arrived in Italy last week to review progress and Berlusconi also agreed to let the IMF monitor implementation.

Meanwhile, the EURdropped for the first time in three days versus the USDand JPYas Italy’s borrowing costs increased at a five-year note sale and Spain’s yields relative to that of Germany reached a euro-era record. The EURdecreased one percent to 105.073 against the JPYand declined 0.9 percent to 1.36335 versus the USD. The CHFgained 0.9 percent to 90.823 against the USD. The GBPfell one percent to 1.59335 versus the USD.

Daily Technical Analysis - Our Focus Currencies for Today

GBP/AUD (4 Hours)

As we can see, the GBP/AUD is moving inside a bullish trend channel for the last three weeks. Recently, the currency pair has decreased and touched the lower line of the channel, while the Moving Average indicates further wins. It remains to be seen if the pair is strong enough for a clear breakthrough.

Intraday Support & Resistance (4 Hours)

GBP/CHF (4 Hours)

Since the end of October, the bulls are in control of the GBP/CHF and are pushing it up towards the upper Bollinger band. First attempts to cross the resistance line around 1.45261 have failed. Recently, the pair touched the support level around 1.43810 and continued the upward motion. The narrowed Bollinger bands could be an indicator for a strong movement.

Intraday Support & Resistance (4 Hours)

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