Market Commentary
Major talk overnight was on the Greek referendum and the associated ‘No’ vote. Unfortunately, of the two scenarios, the ‘No’ vote has left the markets with the most to work out. The Greek government is stating that they think a deal could be within the next 24 hours, but the markets are pricing in the fact that we are likely to see a withdrawn stalemate to the whole situation. Expect talks to resume on Tuesday and continue, and therefore for markets to remain headline driven for awhile. Unfortunately, despite some decisive comments, we expect the Greek stalemate to continue for some time and suggest traders prepare accordingly.
The euro gapped lower at the open, affecting both EUR/USD and EUR/JPY. We saw a similar situation last weekend, which then proceeded to retrace the entire gap throughout the day, leading to one of the worst days for CTA’s in history (Currency Trading Funds). Overnight, the pairs closed the gap, and as of the open, are now trading towards the close on Friday.
EUR/USD opened just below 1.100, with EUR/JPY opening below 134.00. We now need to be careful for headline risk as well as the light volume driving the current directions in all euro crosses.
GBP/USD opened slightly lower on the news, all be it with far less impact than the Euro crosses. USD/JPY also opened lower on the general risk off theme. Both pairs opened at their respective support levels, with USD/JPY opening at the 121.93 mark and GBP/USD opening at the 1.5549 level.
Light news day today, bar US ISM numbers in the afternoon, which means that there will be additional focus on Greek headline risk.
Following the news from Greece, there have been some interesting comments out of several of the banks now, suggesting that a Greek exit ‘Grexit’ from the Eurozone is the most likely scenario, and that the actions surrounding the referendum could result in a delay to the US rate hike, initially estimated at September, now being pushed to December.
We expect talks on Tuesday to furnish some further information, but hold out little hope for an early deal, although we aren’t in agreement yet that ‘Grexit’ is the only option. We would suggest traders prepare for drawn-out talks over the next few weeks; if we get an early resolution, then great, but some relatively choppy headline chasing price action is likely to occur, with support and resistance strategies in line with order flow the best possible options along with breakout trades.
Technical Commentary
EUR/USD
Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Following a gap open, the pair has rebounded nicely to fill the initial gap. We expect relatively light volume today as market participants prepare for a Eurogroup meeting tomorrow, although early resolutions from any talks seem unlikely.
Euro has been relatively strong lately and well supported, with 1.1020, 1.0989 and 1.0952 now offering key support.
Daily Order Flow bearish; OBV down, Linear Regression and Psychology.
Strategy: Monitoring intraday price action around the 1.1000 resistance level. Strong rejections could offer good value shorts.
GBP/USD
Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Gap at the open to the major support level quickly retraced higher. Key support resides at the 1.5556 level, where we have seen the majority of orders overnight. Initial resistance comes in around the 1.5606 level.
Daily Order Flow bearish; OBV down, Linear Regression and Psychology both lower.
Strategy: Monitoring intraday price action at the key resistance level of 1.5606. Strong rejections could offer good value shorts.
USD/JPY
Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish to Neutral
Like the euro crosses, this pair gapped significantly lower at the open and retraced the gap prior to the London session open. Majority of the orders overnight coming in slightly above the 122.30 level.
Initial resistance comes in around Friday's close at 122.80, followed by next major set of orders at 123.053.
Daily Order Flow Bearish; OBV sideways, Linear Regression lower, Psychology lower.
Strategy: Monitor intraday price action around key resistance levels.
EUR/JPY
Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
Pair has retraced the large gap lower at the open prior to the London session, in a similar story across most euro crosses. Key resistance and orders sit towards the London session open in the pair at 135.43, with intraday support coming in at 134.80.
Next major resistance in the pair comes in around 136.20.
Daily Order Flow bearish; OBV down, Linear Regression and Psychology bearish
Strategy: Monitor intraday price action around key resistance levels. Strong rejections could offer good value shorts.
