Last Friday saw US stocks pull off their lowest levels of the week after some encouraging signs from an initial meeting between the US President and Congressional leaders, before the President headed off for an Asian tour. While the early signs of progress are encouraging there remains a long way to go in what will be a holiday shortened week for the US ahead of Thanksgiving and the busiest shopping day of the year the day afterwards, Black Friday. The late bounce in the US should translate into a positive European open this morning in a week where the same seemingly intractable problems remain, with respect to Greece and the sharp slowdown in growth in the euro area economies, likely to be reinforced by the latest PMI’s which are due later this week. With that in mind we see yet another Eurogroup meeting where once again the thorny subject of Greece’s debt sustainability and the release of the next aid tranche will once again be top of the agenda tomorrow. IMF chief Christine Lagarde appears to have undergone an epiphany with respect to Greece’s finances for her constant calls for “reality” over “wishful thinking” when it comes to this subject, putting her on the opposite side of the argument to Eurogroup head Juncker, with their spat last week still fresh in the memory, amid concerns that the IMF could well step away from further involvement in Greece’s affairs. While her sudden conversion is timely, it would have been much better served months ago, and is probably driven by the IMF’s main backers, the US as well as other key players like, Brazil, China and Russia who want European leaders to start taking responsibility for the on-going state of uncertainty, which has proved so toxic for investor sentiment the past few months. Last week we started to see the first indications within EU circles of an acknowledgement that write-down were likely if not inevitable, when ECB member Coure was followed quickly by Bundesbank chief Jens Weidmann when they both stated that it was inevitable that Greece would need a debt haircut, while Weidmann added a caveat that it should only be considered after tough reforms had been implemented, in a form of quid pro quo. Mr Weidmann could well elaborate further on these comments when he speaks later this morning at the 15th Euro Finance week in Frankfurt. Anything like this would still be a problem for the ECB, which has insisted all along that this would be tantamount to monetary financing, and thus illegal under its charter, though they are increasingly coming under pressure to forego the profits in their Greek debt purchases in an attempt to bring down Greece’s liabilities. While this new realism appears to be a start the politicians still appear to be indulging in “wishful thinking” and don’t appear to be listening with German Finance Minister Schaeuble once again insisting that any reductions in Greek debt are legally unworkable, while ESM chief Regling also insisted that Greece would not get debt relief. EURUSD – last week’s failure to overcome 1.2825 and the 200 day MA saw the euro slip back on Friday, dropping back to 1.2690, just shy of the 1.2650 level and 100 day MA. The next support comes in at 1.2605 which is 50% retracement of the 1.2045/1.3170 up move. A rebound needs to overcome the 1.2900 level to stabilise and target 1.3000. GBPUSD – despite dropping briefly below the 200 day MA at 1.5850 the lack of momentum prompted a rebound back towards 1.5900. To push conclusively lower we would need to see a move towards and break below 1.5790 trend line support from the 1.5270 lows as well as 1.5660. Rebounds need to get back above the previous support level at 1.5960 level to retarget last week’s high at 1.6050. EURGBP – last weeks break above 0.8030 last week failed to push beyond the 31st October highs at 0.8075 and the 200 day MA at 0.8084. It needs a move back below 0.8000 to suggest a revisit of the lows this month at 0.7955. USDJPY – the next and key resistance lies at the 81.80 area a break of which could be the catalyst for a move towards the March highs above 84.00. Last week also saw the US dollar close above the weekly cloud for the first time since April, which should be bullish. The 79.75 level should now act as support; otherwise we’ll end up heading back towards the November lows at 79.00.