We look to be ending the week precisely as we started it, with Cyprus at the centre of the headlines, staring into the abyss of potential bankruptcy and a possible exit from the euro area. Ratings agency Standard and Poor's added some colour to the proceedings as well downgrading Cyprus to CCC with a negative outlook. As such Europe's markets look set to open lower. With the troika of the ECB, IMF and EU playing hardball telling the Cyprus government to present an acceptable plan by Monday or have the ECB pull the liquidity line to their banking system, the stakes could not be higher. This threat by the ECB is a very high stakes threat, because without the ELA program the Cypriot banking system would collapse and take the economy with it, with the ever present risk that Cyprus could leave the Eurozone. Even if a deal is agreed and the banks re-open it is almost certain that the Cyprus banking system will collapse anyway as savers rush to pull their money out from the banks after last weekends botched bailout plan. In any case the Cypriot government is set to vote on a new plan today to overhaul its two largest banks, imposing 40% losses on large depositors while guaranteeing all deposits up to €100k, and splitting the two banks into a good bank and a bad bank. MP's will also vote on capital controls in order to prevent a run on the banks when they are expected to reopen on Tuesday. Any new plan then has to be agreed by the troika of lenders who will want any restructuring plan to reduce bank debt by €5.8bn. The most recent ZEW and IFO surveys from Germany have contrived to give the impression of an economy rebounding strongly from the contraction seen in the fourth quarter of 2012. Even the recent PMI data has been broadly positive with readings pushing near to and beyond the 50 level in January and February. It was therefore with some surprise given this week's fairly resilient ZEW reading that markets were wrong footed somewhat by unexpectedly weak manufacturing and services readings for March. This would seem to suggest that the fire of the recent rebound in economic activity is starting to go out. It can't be a coincidence that the slow down appears to coincide with the recent uncertainty in Italy and Cyprus, though it could also be said that both surveys overestimated the extent of the recovery, given that these surveys rely more on confidence than empirical data and actual orders. Today's IFO survey for March could well muddy the waters further if all measures improve as is widely expected. Expectations are for a fifth successive monthly rise to 107.80, from February's 107.4. EURUSD - the euro continues to look heavy however the 200 day MA continues to just about support it, but we do seem to be gearing up for a move lower. A close below the 200 day MA at 1.2875 and 50% retracement of the 1.2045/1.3710 up move brings the risk of a move towards 1.2680. We still remain at risk of a pullback towards 1.3030. The resistance on the topside remains at 1.3130, where we have the 100 day MA, and behind that we have resistance at 1.3170. GBPUSD - the pound continues to struggle above the 1.5200 level; however it does appear to be forming an inverse head and shoulders with the neckline at 1.5220. Given the bullish engulfing week seen last week a break could well see a move towards the 1.5400 level, and even 1.5600. If we drop back below the 1.5000 level then we could fall back towards 1.4920. EURGBP - currently below the 200 week MA at 0.8520 if we close the week below it we could well fall even lower towards 0.8480 initially and then 0.8420. We need to push beyond the 0.8580 area to retarget the 0.8680 level. USDJPY - yesterday's sharp drop back towards the lows of last week at 94.40 keeps the US dollar confined to a range between 94.00 and the recent highs above 96.00. As long as we stay above the 94.00 level then we should get a move towards the 99.80 level which is 50% retracement of the 124.15/75.30 down move. A break below 94.00 opens up a move towards the 92.80.