Greece’s decision to invoke collective action clauses to bring the debt swap deal up to 95.7% participation saw ISDA bow to the inevitable on Friday and invoke a credit event and in turn signal the triggering of Greek CDS insurance.

There still remains some uncertainty as to the effect such an action will have on European banks even allowing for a net payout of around $3.2bn, but in truth ISDA had little choice given the effect ruling against a default would have had on European bond markets.

As it is the wriggling by ISDA in recent days over the triggering of the insurance has already created uncertainty as to the worth of such insurance going forward and as such could well make future European bond issuance fraught with difficulty in the future.

Despite French President Sarkozy’s ridiculous assertion at the weekend that the Greece crisis had been resolved, there is widespread acknowledgment that even after last weeks debt swap that the country will in all probability need a third bailout, after economic data Friday showed that the economy shrank even more than first thought in Q4, by 7.5%.

In any event EU finance ministers look set to sign off on the €130bn Greek bailout today, despite the fact that the likelihood of a further default remains probable given that the newly issued bonds could still come in at a higher yield than Portugal’s bonds are currently trading.

With this in mind the IMF looks set to scale back on its involvement in the plan to around 14% of the total funds. This reluctance to commit more is designed to put pressure on Europe and in particular Germany to do more to stem the crisis.

Even without the problems in Greece, concerns about the growth in the rest of Europe remain with today’s release of Italian Q4 GDP set to show a contraction of 0.7%.

Higher oil prices also remain a concern with once again the price of the black gold once again approaching all-time highs against both the pound and the euro at the end of last week, above £80 and €95 a barrel.

EURUSD – the single currency ran into a wall on Friday dropping from the 100 day MA at 1.3280 and dropping back towards the 55 day MA at 1.3080.
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 – the pound continues to look fragile heading towards the February lows at 1.5645 as well as the 55 day MA at the 1.5660 area. A concerted break here argues for further weakness towards 1.5530 and 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 – the 0.8400 level continues to act as a strong cap for the euro. This level remains the main barrier to further gains towards the 0.8500 level.
As a result of this reluctance to move higher further downside pressure continues to be the dominant theme; with the trend line support from the 0.8220 lows at 0.8310. A move through the 0.8300 level retargets the January range lows at 0.8220.

USDJPY – last weeks strong weekly close above the Ichimoku cloud at 81 brought the US dollar close to the medium term target at the 82.85 level, which is the 38.2% retracement of the down move from the 2010 highs at 95 to the lows at 75.30.
This augurs 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.