RBA Decision
We do not expect much from tomorrow RBA board’s meeting, as we think that the Reserve bank is pleased with the recent weakness in AUD/USD. Indeed, the Aussie dropped as low as 0.7452 against the greenback Sunday night, and is now back above 0.75. The Aussie sent a strong bearish signal, as it broke the strong support standing at 0.7533. We remain bearish on the Aussie against the greenback, with the $0.7416 level as next target. We anticipate the weak economic outlook, mostly due to persistent low commodity prices - the price of iron ore, for immediate delivery at the port Qingdao in China, dropped more than 15% since June 11 – and a subdued global demand to maintain the pressure on the AUD.
The Greeks Say No
Yesterday, the Greeks voted massively, at 61.3%, for the “no” against latest bailout terms from creditors. This is a major victory for Alexis Tsipras who announced last week, against all odds, that a referendum would take place.
We now wonder what will be the real impact of this outcome. Yanis Varoufakis, the Greek Finance Minister, announced early this morning that an agreement with lenders may still be reached within the next 24 hours. However, the Greek finance minister resigned this morning by saying in a note in his blog that most of the Eurogroup participants were reluctant to negotiate further with him.
In addition, despite Tsipras' declaration that Greece wants to stay in the Eurozone and that negotiations will continue, we remain suspicious that a deal will be settled. Greece is heading toward the EU exit door. Let’s recall that in 2012, the overall debt had been restructured. Three years later, the Greek debt to GDP ratio is higher than ever. At some point, we think that an official default will come.
For the time being, Greek banks remain closed, and the cash withdrawal of €60 per day per person is likely to be cut. We also hear talks that a 30% tax on Greek savings above €8,000 is possible. Greek banks are still at stake, and this is why Greece’s central bank is now requesting the emergency funding be raised.
This Monday, Angela Merkel will meet François Hollande. Greece’s creditors have more pressure on their shoulders, and therefore, they will be more willing to provide significant debt relief measures. The next payment is due to the ECB on July 20th. Consequently, negotiations promise to be tense until there.
The EUR/USD opened this night with a large downward gap, although much less than last Monday, at 1.0980. Yet, the currency is going up on Greek declarations that “an agreement should reached.” European equities are likely to suffer today.
AUD/USD - Breaking Support at 0.7533
The Risk Today
EUR/USD EUR/USD has opened with a wide gap, but the pair is now heading upwards. Hourly resistance is at 1.1278 (29/06/2015 high). Stronger resistance lies at 1.1436 (18/06/2015 high). Hourly support is given at 1.0868 (28/05/2015 low). We expect the pair to remain below 1.1100. 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 GBP/USD has broken support at 1.5542 (16/06/2015 low). Hourly resistance can be found at 1.5930 (18/06/2015 high). We expect the pair to decrease toward hourly support at 1.5488 (15/06/2015 low). 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 USD/JPY has broken support at 121.94 (30/06/2015 low). Hourly resistance can be found at 124.45, and stronger resistance still lies at 135.15 (14-year high). The technical structure still suggests a downside momentum. 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 USD/CHF is pausing before challenging the hourly resistance at 0.9543 (27/05/2015 high). Stronger resistance can be found at 0.9721 (23/04/2015 high). Hourly support can be found at 0.9151 (18/06/2015 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 (30/01/2015 low).
