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The EU bank stress test results were viewed from different angles by various market analysts. On the one hand, some analysts thought that they were a success as they addressed some of the concerns faced by investors, by pointing out the few weak links in the euro-zone banking system. Overall, out of 91 banks examined, 7 banks were found to be in need of further capital strengthening to be able to withstand a potential deterioration in credit conditions. These vulnerable banks included Germany's Hypo Real Estate Holding AG, which was bailed out during the recent financial turmoil, Greeces' Agricultural Bank and five Spanish savings banks. Official results indicated that banks need an additional 3.5 billion euros in order to have an adequate capital basis. The extremely small amount of capital raising suggested by regulators, about ten times less than the lowest analyst prediction, has led many analysts to question the actual credibility of the tests. In fact, some argued that the tests tell us nothing new we don't already know about the banks, and that regulators were probably not strict enough in conducting these stress tests. However, U.S. equity markets finished the session stronger on Friday, following the release of the test results, and so was the Asian session. Markets will be awaiting for the reaction of the european equity markets today, as the results were announced after they had already closed on Friday.      

EUR/USD

After its recent failure to successfully break above 1.30, the pair has been consolidating just below 1.2950, as some investors still feel that the fundamental debt problems faced by the EU will not go away any time soon. It is also likely that there is still some confusion as to the extent of the success of the actual tests, and perhaps some market participants are prudently waiting to see the stock market response when the european trading session kicks off today.

Support/Resistance 1.2875/1.2950

GBP/USD

Has been trading in a nice uptrend, supported by the recent optimism in global equities and an increased risk appetite. However it has recently ran into a significant resistance level at around 1.5460, and it would require a successful break above this level in order to continue to rally. Otherwise, some correction could take place, with the cable taking a pause around 1.5390 and 1.5350 as initial steps. The next major support level could be found around 1.5260.

Support/Resistance 1.5390/1.5460