The Eurogroup finance ministers meeting continues today after ministers signed off on the first tranche of the second Greek bailout of €35.5bn, pending discussions about the IMF’s contribution on Thursday, as well as national votes.

Economic affairs commissioner Olli Rehn went on to say that the success of the Greek programme would hinge on implementation risks and political unity in Greece, an enormous caveat if ever there was one with elections coming up on April 15th, and with the two main parties lagging badly in the polls.

With the ink barely dry on the Greek debt agreement it would appear that litigation looks ready to start in earnest with lawyers in Germany representing 110 Greek bondholders launching a class action to sue banks and the Greek state, though what they expect to achieve is not entirely clear given that Greece has no money.

Pressure was also been brought to bear on Spain by EU officials to cut its budget from the 5.8% of GDP this year to 5.3% with EU ministers insisting that, despite rising unemployment, that further front loading of cuts is required. The compromise from the previous 4.4% number imposed by Brussels rather undermines the tough talk surrounding the fiscal compact, in the face of Spanish defiance, but given Spain’s problems it’s still a big ask, especially as the 2013 target of 3% has been left unchanged.

Options to look at expanding the size of the €500bn ESM are set to be discussed at the next meeting in Copenhagen at the end of the month.

Attention also turns to the UK again this week after last Friday’s disappointing industrial production data as the next budget looms large. The latest January trade data is expected to show that the Chancellor remains on target to come in well under his borrowing target for 2011 with expectations that the deficit will come in slightly higher at £7.9bn, up from December’s £7.1bn.

Germany looks set to continue to stand out as the one of the few beacons of growth in Europe with the latest ZEW economic sentiment for March set to build on last months surprise improvement with a rise from 5.4 to 10.

The improvement in US economic data looks set to continue today with US retail sales for February expected to show a significant improvement from January’s 0.4% rise with expectations of a rise of 1.1%.

The latest FOMC meeting isn’t expected to give any further clues with respect to monetary policy so anyone expecting clues as to any possible timing of QE3 will be disappointed. At some point the Fed will have to acknowledge that recent data has been much better than expected and as such the argument for further measures has been significantly reduced.

EURUSD – the failure to push below the 55 day MA at 1.3080 yesterday keeps the single currency in its range with resistance still at the 100 day MA at 1.3250 as well as the highs last week at 1.3290.
These two levels seem to be containing the current price action and as such a break either side could well give clues to the next direction on travel.
On the upside above 1.3290 argues for a move towards 1.3370, while below 1.3080 argues a move towards the February lows at 1.2975.

GBPUSD – yesterday’s break below the 55 day MA and February lows at 1.5645 saw the pound rebound from the 1.5610 level which is also 50% retracement of the entire up move from the 1.5240 lows to the 1.5990 highs.
These new lows argue for further weakness towards 1.5530, the 61.8% level as well as 1.5420.
To stabilise the pound needs to recover above the 1.5830/40 area which is what it was unable to do late last week. The key barrier on the upside remains at the 200 day MA at 1.5890 and this remains a key resistance level for another crack at the 1.6000 area.

EURGBP – yesterday’s move above the 0.8400 level triggered a few stops but it hasn’t been able to push beyond the 0.8425 level which has in the past been a fairly good resistance level. A break higher could well see a retest of the high this year just above the 0.8500 level.
Despite this squeeze higher downside pressure continues to be the dominant theme; with the trend line support from the 0.8220 lows now at 0.8310. A move through the 0.8300 level retargets the January range lows at 0.8220.

USDJPY – having fallen just shy of the medium term target at the 82.85 level, the US dollar has slipped back slightly. The 38.2% retracement of the down move from the 2010 highs at 95 to the lows at 75.30 at 82.85 remains the next objective after last weeks strong weekly close above the Ichimoku cloud at 81.
This continues to augur well for further gains towards 85.15 which is the 50% level of the same move and given previous price action when the weekly cloud has broken we could well see 90 in the next 12 months.
The key support levels now lie at last weeks low at the 80.60 area.