Forex News and Events
Greece reached an agreement with its creditors:
“Last week ended when, against all odds, Greek Prime Minister Alexis Tsipras decided to agree on creditors’ proposals that were once rejected by the Greek Government on June 26th. Over the weekend, negotiations have been tensed as it seemed that creditors were using the Greek Exit threat as a last tool for negotiations knowing that neither Tsipras’s government nor Greek people want to leave the Eurozone. Surprisingly, this morning, Donal Tusk, President of the European Council announced that an agreement has been reached between Greece and its creditors on a future bailout. However Germany and Finland took the hard line by asking Greece to implement draconian measures within the next 72 hours as a show of good faith. In addition it is still unclear if Greece will be able to pass those reforms over the parliament in such short amount of time. We now wonder how Greek People who basically voted for the “No” against austerity will accept those bold reforms, in particular concerning VAT and pensions systems. Tsipras’s credibility is likely to be hit. After holding the ground for months, this morning agreement is like a Greek surrender. Further step is the start of the ESM (European Stability Mechanism) negotiations which consist in a set of serious reforms and financial support in a purpose to save Greek banks. This morning EURUSD is increasing on Greek Agreement. The pair challenged 1.1200 before decreasing and new information makes the currency very volatile.”
More SNB Intervention
SNB Sight deposits rose to chf396bn in the week ending July 10th from chf391bn a week earlier. This indicates that the SNB remains active in the defending the CHF from further unwanted appreciation. This increase comes on the heels of the SNB unusual confirmation of currency intervention. Clearly, as uncertainty emulating from Brussels/Athens bailout negotiation further drives capital into Switzerland, the SNB need traders to understand the central bank stands ready to combat CHF appreciation against EUR with direct action. However, given the expansion of the SNB balance sheet to above 87% of GDP we don’t anticipate traders to be worried over SNB intervention / policy actions. Only a positive change in the Europe / Greek discussion will have a material impact on the CHF strength.
Yellen and US data
With a deal seemingly accepted on Greece attention can refocus on domestic conditions driving monetary policy. This week the USA will release a sessions of economic indicators that will help us understand the economic development in the second quarter. In whole, we anticipate that the overall picture of the US economic is one of healthy expansion. We should get prints on retail sales, industrial production and CPI while hearing Fed Chair Yellen's Congressional testimony. Chair Yellen's Congressional testimony could not be more timely with attention back on the Fed policy path. We anticipate a balanced Yellen yet positive comments on improve economic data will keep September hike on the table. She should repeat comments that the markets should not dwell on the timing of the first hike but moderate pace of normalization. As the policy divergence theme comes back into focus USD bullish momentum should be reinvigorated.
EUR/USD is trading between hourly resistance at 1.1278 (29/06/2015 high) and hourly support at 1.0916 (07/07/2015 low). Stronger resistance lies at 1.1436 (18/06/2015 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 has consolidated above 1.5500. Hourly support is given at 1.5330 (08/07/2015 low) and hourly resistance can be found at 1.5644 (03/07/2015 high). Nonetheless, we expect the pair to decrease again within the next few days. 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 is increasing but remains in a declining trend. Hourly support is now given at 120.41 (08/07/2015 low). Hourly resistance can be found at 124.45 (17/06/2015 high). Stronger resistance still lies at 135.15 (14-year high). The technical structure still suggests a downside momentum as the pair is setting lower highs. 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 approaching again hourly resistance at 0.9543 (27/05/2015 high). Stronger resistance can be found at 0.9719 (23/04/2015 high). Hourly support can be found at 0.9151 (18/06/2015 low). The pair is likely to erase hourly resistance at 0.9543. 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).
