Forex News and Events
This morning, European equities are stabilising - trading even higher - on Greek hopes after Friday’s sharp sell-off and despite significant progress in ongoing talks. This morning’s equity gains show that investors are expecting a more positive outcome. Nevertheless, Greece wasn’t able to secure a deal with its creditors to access the remaining €7.2bn bailout fund, missing the Sunday self-imposed deadline. During the weekend, Alexis Tsipras declared that creditors made “absurd demands” and that Greece shouldn’t be blamed for not having reached an agreement. According to French newspaper Le Monde, Greece’s Prime Minister added that institutional representatives do not take into account the results of the recent legislative elections by making unreasonable demands while European and international institutions are more prone to be more flexible.
Major deadlines are fast approaching with the first payment of a series due on Friday to the IMF (340mn SDRs or about €300mn equivalently). By the end of June, Greece has to pay around €1.5bn to the IMF and it is likely that the country won’t even be able to even meet the second payment of €341mn (due on June 12 to the IMF) without fresh bailout funds. Moreover, by July 20 Greece has to repay €3.2bn of bonds held by ECB. We therefore think it is likely that an agreement will be settled this week (they still have 4 days to reach an agreement). This week, European markets will therefore be driven by Greek talks and US data (NFP on Friday). EUR/USD is grinding lower this morning and sits currently on the 1.09 support level. Expect sharp moves as negotiations go on.
RBA unlikely to lower its cash rate target (by Yann Quelenn)
The Reserve Bank of Australia Board meets on Tuesday to decide whether there is going to be a lowering of its cash rate target from the current record-low at 2%. Australian economy is at skate, indeed it is having low inflation as well as experiencing uncertainties on growth. In April, unemployment rate has slightly increased to 6.2% from 6.1%. In addition investment and business confidence are still fragile. Last night’s figures, Building Approvals came it at a disastrous -4.4%, much more than the survey at -1.8% and a prior print at 2.9%. Nonetheless, the overall increase has been 16.3% y/y. Cutting rates will help underpin housing bubbles. In Sydney, price rose 15% since a year.
Furthermore, the reserve bank is certainly reviewing more data before deciding another call on interest rates, which is set to have important impacts. In a country where the ratio household debt-on-income is high, we do not think that rate can be currently changed. Should we see no changes as we expect traders should watch for a short term AUD rally. The AUD/USD is now trading around 0.7661, as soft economic data pushed the pair downside. The support at 0.7618, 1-month low, is on target.
EUR/GBP - approaching key support
The Risk Today
EUR/USD is now trading between the hourly resistance at 1.1006 (29/05/2015 high) and the support at 1.0868 (28/05/2015 low). Stronger support can be found at 1.0820 (27/04/2015 low) while upper resistance is given at 1.1217 (19/05/2015 high). In the longer term, the symmetrical triangle from 2010-2014 favors further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). Break to the upside would suggest a test of resistance at 1.1534 (03/02/2015 reaction high).
GBP/USD is still declining through a short-term trend-line. The downside momentum continues. Hourly resistance can be found at 1.5437 (27/05/2015 high) and supports is given at 1.5224 (intraday low). Stronger support is given by the declining channel at around 1.5160. In the longer term, the technical structure looks like a recovery bottom whose maximum upside potential is given by the strong resistance at 1.6189 (Fibo 61% entrancement).
USD/JPY After its sharp increase over the last few days, USD/JPY is still consolidating at around 124.00. We target the resistance at 125.69 (12/06/2002 high). The pair is still bullish as we stay largely above the 200-dma. Hourly support is given at 122.78 (27/05/2015 low). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 118.18 (16/02/2015 low).
USD/CHF is trading between the resistance at 0.9573 (29/05/2015 high) and the supports at 0.9287 (22/05/2015 low). Stronger support lies at 0.9072 (07/05/2015 low). In the long-term, there is no sign to suggest the end of the current downtrend. After failure to break above 0.9448 and reinstate bullish trend. As a result, the current weakness is seen as a counter-trend move. Key support can be found 0.8986.
