EUR/USD: Greece, Strong US Data And Fed’s Getting More Hawkish

GROWTHACES.COM Forex Trading Strategies
Taken Positions
USD/JPY: long at 122.50, target 124.20, stop-loss moved to 122.50, risk factor ***
USD/CHF: long at 0.9280, target 0.9500, stop-loss moved to 0.9370, risk factor ***
Pending Orders
EUR/USD: sell at 1.1150, target 1.0960, stop-loss 1.1210, risk factor ***
GBP/USD: sell at 1.5760, target 1.5550, stop-loss 1.5840, risk factor ***
USD/CAD: buy at 1.2385, target 1.2600, stop-loss 1.2295, risk factor **
AUD/USD: sell at 0.7770, target 0.7580, stop-loss 0.7855, risk factor **
EUR/GBP: sell at 0.7150, target 0.7010, stop-loss 0.7190, risk factor ***

EUR/USD: Uncertainty Over Greece, Strong US Data and Fed’s Getting More Hawkish
(sell at 1.1150)

• Greece became the first advanced economy to default on an International Monetary Fund loan, as the rescue program that has sustained it for five years expired and its creditors rejected a last-ditch effort to buy more time. Greece’s failure to make its EUR 1.6bn bundled-up June payment to the IMF by yesterday’s deadline was widely anticipated. Greece formally cannot receive more financing from the IMF. But it has requested an extension to the payment which is being considered by the Fund’s executive board. The missed payment is not expected to be treated as a credit event and hence will not trigger defaults on Greece’s other debts.
• In a letter sent to creditors on Tuesday, Prime Minister Alexis Tsipras said a proposal sent by the European Commission on Sunday could be accepted in exchange for an extension of the country's bailout programme and new rescue loans. But he asked creditors for gradual changes to pension and labour market reforms as well introducing a smaller cut to military spending this year, among other changes.
• Why did Tsipras drop his anti-austerity rhetoric today? He possibly intended to improve the chances that the ECB’s Governing Council will maintain its support for Emergency Liquidity Assistance to Greek banks at its scheduled meeting today and to leave the haircuts on Greek government bonds used as collateral for such support unchanged.
• German Chancellor Angela Merkel has ruled out further negotiations with Athens until after Sunday's referendum but Eurozone finance ministers are due to confer again late in the European afternoon (15:30 GMT). The initial reaction from ministers and senior officials was that the letter contained elements that ministers will find hard to accept.
• German Finance Minister Wolfgang Schaeuble said the letter came too late, had not brought any greater clarity and was no basis for serious negotiations now. He said it was not clear if it would be possible to sort out a new bailout for Greece before Athens is due to repay EUR 3.5 billion of bonds to the European Central Bank on July 20. He said the legal situation was completely different now and there was a need to develop a completely new programme under completely different conditions.
• Eurozone Manufacturing PMI rose for the second month running to reach 52.5, its highest reading since April 2014. The June final reading was in line with the earlier flash estimate.
• The performance of the manufacturing sector also made progress during the second quarter as a whole, with the average readings for the headline PMI and the indices tracking both output and new orders all at their highest levels since the second quarter of 2014.
• The main negative from the latest survey was the deteriorating performance of the Greek manufacturing sector. Greece suffered the steepest drop in manufacturing output for two years as orders continued to collapse in a month of fraught discussions seeking to stave off default.
• Eurozone PMI showed cost inflation remained solid in June, despite slowing from May’s three-year high, reflecting recent oil price increases.
• The market is focused on Greek default on the IMF today, but some interesting US data will be released: ADP employment (12:15 GMT) and ISM manufacturing (14:00 GMT).
• St. Louis Fed President James Bullard shrugged off the impact of Greece's economic problems and said the Fed will remain data dependent on its view about when to raise interest rates. He added: “I would say September is very much still in play.”
• Federal Reserve vice chairman Stanley Fischer said tentative signs of wage growth and continued job creation gave him confidence that US labor markets would continue to improve, and gradually help push inflation towards the Fed's 2% target. He added: “In order to minimize the likelihood of surprises and thus avoid creating unnecessary market and policy volatility, we are striving to communicate our policy strategy clearly and transparently.”
• There is nothing left from the Monday’s enthusiasm, when the EUR/USD jumped to 1.1278. In our opinion there is a very low chance that we get some sort of deal to prevent the referendum. However, we should expect a relief rally on the EUR in this case. However, we expect a continuation of the EUR/USD fall to 1.0955 (Monday’s low) or even to the May 27 low at 1.0819 on uncertainty over Greece’s future, expected strong US data and Fed’s getting more hawkish. That is why we are looking to sell the EUR/USD at 1.1150.

Significant technical analysis' levels:
Resistance: 1.1229 (10-dma), 1.1248 (high Jun 30), 1.1279 (high Jun 29)
Support: 1.1050 (100-dma), 1.0955 (low Jun 29), 1.0915 (low Jun 2)

GBP/USD: Weaker British PMI Suggests Strong GBP Hurts Economic Recovery
(sell at 1.5760)

• British PMI manufacturing fell to 51.4, the weakest reading since April 2013, from a downwardly revised 51.9 in May. It was below a market consensus that had predicted a slight improvement to 52.5. PMI showed that Over the second quarter as a whole, growth of output and new orders was (on average) the weakest since the third quarter of 2013. June saw UK manufacturing production rise at the slowest pace since April 2013. Although consumer goods output continued to expand at a solid clip, production fell in the investment goods sector and was broadly stagnant at intermediate goods producers.
• Weaker British PMI data suggest a low EUR/GBP rate hurt exports and subdued demand from mainland Europe offset the continued solidity of the domestic market. That is why export trade will likely remain a drag on the economy in the second-quarter GDP data. UK manufacturing remains dependent on the domestic market, and especially the consumer, continuing to show some strength.
• The Office for National Statistics said that British economic productivity rose 1.3% yoy in the first three months of the year. It was the fastest annual growth since early 2012. British productivity has been weak since the start of the recovery as employment has outpaced rapid economic growth. Output per hour is still around 1% lower than its level in early 2008, before Britain tipped into recession. The Bank of England has forecast that productivity will recover gradually as the economic recovery builds, easing potential inflation pressures. The Office for National Statistics said unit labour costs, a measure of how much employers must pay for a given amount of output, and a gauge of underlying inflation pressures, fell by 0.6% on the quarter, but were 0.9% higher than a year ago.
• The Bank of England said it stands ready to take any actions required in response to Greece's worsening debt crisis, which could trigger wider problems on financial markets. The BoE said British banks' direct exposure to Greece was “very small”, but that their exposure to other peripheral Eurozone economies amounted to the equivalent of 60% of the core reserves that they hold against losses. As other major risks it listed Britain's record current account deficit, the housing market, ballooning misconduct fines for banks and their vulnerability to hackers.
• Policymakers worry that when interest rates begin rising, the bond market will lack the capacity or liquidity to cope with a rush for the exits by investors.
• We have lowered our sell GBP/USD order to 1.5760. We do not change our outlook for July and August. We expect lower GBP/USD rate because of improving US data and Fed’s getting closer to a rate hike in September. However, situation in Greece may result in higher volatility on this pair.

Significant technical analysis' levels:
Resistance: 1.5715 (hourly high Jul 1), 1.5766 (10-dma), 1.5775 (high Jun 30)
Support: 1.5641 (session low Jul 1), 1.5627 (low Jun 17), 1.5561 (50% of 1.5191-1.5930)

USD/JPY: Japanese Business Sentiment Improves, Easing Pressure On The BOJ
(long for 124.20)

• The Bank of Japan's closely watched tankan survey showed Japanese business sentiment improved to levels not seen since before the economy slipped into recession last year.
• The headline index measuring big manufacturers' sentiment rose 3 points from three months ago to plus 15 in June, beating a median market forecast of plus 12 and improving for the first time in three quarters. It hit the highest level since March 2014, when consumption boomed ahead of a sales tax hike in April of that year.
• The mood among big service-sector firms improved by 4 points to plus 23, beating market forecasts and rising for three straight quarters to reach a level last seen in March 2014.
• Big firms plan to raise capital expenditure by 9.3% in the fiscal year from April. If companies do increase capital expenditure at that pace, it will be the biggest rise since fiscal 2006.
• The upbeat data should ease pressure on the Bank of Japan to expand monetary stimulus further even though inflation remains distant from its ambitious 2%. The Tankan data confirmed our upbeat view on Japanese economy in the coming months. We do not expect any additional monetary easing by the BOJ later this year.
• The USD/JPY dipped to 122.36 after the better than expected Tankan but the dip was short-lived.
• We stay USD/JPY long, as we expect the USD to be stronger during summer on better macroeconomic figures and approaching Fed hike in September. However, the JPY may appreciate in the fourth quarter this year, if the BOJ does not expand its QQE programme.

Significant technical analysis' levels:
Resistance: 123.19 (high Jun 29), 123.98 (high Jun 26), 124.37 (high Jun 24)
Support: 122.36 (low Jul 1), 121.95 (low Jun 30), 121.53 (low May 26)
Source: Growth Aces Forex Trading Strategies