The news of a prospective Greek bail-out plan put together by France and Germany may well go some way to soothe investor concerns about a sovereign default in Europe and has gone some way to stabilising the Euro in the short term, especially against sterling which has undergone a torrid last 7 days.

Under the plan as much as €30bn worth of Greek debt would be purchased in the form of bonds, through their respective state owned banks, but there will be onerous strings attached as the Greeks will have to make up to an extra €4bn worth of cuts in public spending, which could well prove to be the tricky part of the equation, given some of the social unrest seen last week.

Commodities like oil and copper have popped higher after the earthquake in Chile at the weekend with copper hitting $7,600 on the LME, and crude oil back above $80 a barrel.

Sterling has continued to tumble on currency markets after a weekend opinion poll put Labour only 2 points behind the Conservatives, increasing the likelihood of a “hung” parliament, while the US dollar is being supported by Friday’s better than expected GDP figures as well as the Fed starting to withdraw from some of its stimulus measures, as it looks to wind up its buying of mortgage back securities this month.

EURUSD – the key 1.3485 Fibonacci support level has remained intact on a daily close, and late Friday the Euro broke above channel line resistance at 1.3620 from the 25th January highs of 1.4195 on rumours of a possible bail-out plan. This may lend support in the short term, and could see the Euro push up towards 1.3720, but changes nothing with respect to the longer term downside risk of a move towards 1.3200.

GBPUSD – the break through sterling index support at 78.00 has undermined sterling across the board and could send it towards its October lows at 76.40. The break below the 1.5180/90 support level now targets a move towards the larger 1.4980/1.5020 support zone as well as 1.4850 which is the 61.8% Fibonacci retracement of the up move from 1.3500 to 1.7045.
The pound needs to get above the lows two weeks ago at 1.5350 in the first instance, to re-target the 1.5540/70 resistance area.

EURGBP – the cross has broken a key resistance level, after breaking above the 200 day MA at 0.8825 last week. This technical break now brings the January highs around 0.9040/50 into focus.
As long as the Euro can stay above the 200 day average currently at 0.8830 then further upside is possible.

USDJPY – the yen continues to trade at the upper end of its recent range as it continues to strengthen and benefit from risk aversion. While below 89.30/40 the risk for a move towards 88.25 remains the risk, while a break above could see a sharp move back towards 90.00.