FXstreet.com (Barcelona) - The EUR/USD is trading heavy on the early going of the Asian session. As strategists at NAB note, the drop comes after "news that former Italian PM Berlusconi has said he will run in the next Italian elections, after his centre-right People of Liberty party (PDL) withdraw its support for the technocratic government led by Mario Monti - and Monti in turn announced his intention to resign."

NAB adds: "The prospect of Italian bond yields spiking higher when Europe opens is driving the euro lower. EUR bears would though do well to note that the People of Liberty party currently trails the centre-left Democratic party by 20% points. Plus, the re-appearance of Mr Berlusconi to the centre of the Italian political stage may well prompt Mr Monti to make him himself available for re-selection as PM after elections now seen likely to occur next February, three months earlier than originally intended."

The bank notes 1.2875 is very important support on EUR/USD, "below which there is risk of a slump to as low of 1.2630" NAB says.