Consolidation set in overnight following last Friday's EUR gains and extended JPY losses. The G10 FX are still relatively close to recent levels and short term technical indicators should dominate amid a relatively quiet European data calendar. The marked improvement in eurozone sentiment should continue to drive money into the EUR and the balance of risk is on 1.3500 option barriers. However, policy makers are still warning that the crisis is far from over and economic fundamentals in the region are very disjointed. USD-JPY traded at new trend highs around 91.30 in early Asia Pacific trade and then pulled back to 90.70 on profit taking. There is potential for more choppy action this week due to large gamma hedging related to maturities between 90.00 and 91.50, along with outstanding barrriers. GBP continues to trade under pressure amid triple dip recession risk after a weak Q4 growth reading, which followed other challenging domestic data over the last week or so.

[EUR, USD]
EUR-USD was supported on dips after it ran into supply ahead of last Friday's 1.3480 highs, which are reportedly linked to very large 1.3500 barriers. Buyers into 1.3450 and below were mainly short term in nature, but real money is anticipated into 1.3430 and 1.3400 intra-day and should also emerge towards 1.3380 and 1.3360. Friday's ECB LTRO repayment announcement was well received and added to evidence that conditions in the eurozone are markedly improved.

[USD, JPY]
USD-JPY registered early trend highs just over 91.30 amid speculative yen selling, but movement was choppy. Profit taking and exporter offers capped, along with flows related to oustanding barriers from 91.50 and large option expiry congestion that is due to mature over the course of the week. EUR-JPY was supported on dips, but also experienced a round of profit taking ahead of 123.00 barriers, leaving it close to 122.00 by the time the European session got underway. There no reaction in Asia from Japanese policy rhetoric, which did not deviate from previous sessions. JPY should continue to meet selling pressure on upticks, though large option maturities between 90.00 and 91.50 this week could potentially restrict price action.

[GBP, USD]
GBP continues to trade under pressure in the low 1.57s after it slumped on Friday after U.K. Q4 GDP was weaker than expected. It came in at -0.3% q/q from +0.9% previously. Cable sank from 1.5815 through 1.5750 barriers, while EUR-GBP breached 0.8525 on Friday and has extended up through 0.8550 barriers since the European session got underway today. Cable looks poised to threaten 1.5700 and move on support at 1.5670-80.

[USD, CHF]
EUR-CHF moved briefly over 1.2500 in early Asia, but has pulled back to 1.2475 on profit taking activity. General EUR support on dips should keep the downside limited and buyers are noted into 1.2450 and 1.2400. SNB's Jordan said that the franc is still at high levels, but expected it to weaker further.

[USD, CAD]
USD-CAD touched the 1.0100 mark on Friday. Sellers were in place at the figure, though if these are filled in, stops will likely be a factor from 1.0110. The CAD has steadily eroded since the more dovish BoC announcement last Wednesday, while cooler CPI data weighed as well, though the break over the December high of 1.0057 gave traders another reason to buy USD-CAD. The pairing touched levels last seen in July, 2012 before easing back towards 1.0050 on profit taking.