Weekly Trading Notes – Greece still driving sentiment and volatility


  • Just when the markets thought it would all come to a conclusion, once more the Greek “crisis” has rumbled on. Unless there is some huge and dramatic turn of events, Greece will default on its €1.6bn IMF repayment that is due today, or in IMF parlance “arrears”. Apparently there is still a proposal (that was submitted by European Commission President Jean Claude Junker) that can still be agreed upon. However despite some media reports suggesting that Greek PM Tsipras was reconsidering the deal, he would need to do a spectacular U-turn which is highly unlikely. Instead, there is now going to be a default and Greece will instead hold a referendum on Sunday asking whether the country should accept the creditors’ terms. With initial (but unofficial) polls suggesting there is a majority saying “No”, it looks as though Greece is moving ever closer to a default. Greece continues to drive market sentiement.


  • Tsipras seems to be adamant that Greece will not be kicked out of the Eurozone though. Perhaps his confidence is all part of his negotiating tactic, but the patience of the creditors is clearly wearing thin and with the Eurozone much better set up to contain any contagion from a potential Grexit. I have a feeling that with several days before the referendum on Sunday, there will be more rumours circulating that will drive markets and keep volatility elevated throughout the week.
  • Financial market volatility has spiked higher though. It remains to be seen whether this will end up just being the initial knee-jerk reaction or perhaps systematic of something more concerning. The spread on Eurozone sovereign core versus periphery debt is one way of measuring the stress in the system. After the initial sharp decline in the German Bund yield and move higher in Spanish yields, the spread has begun to reduce as the demand for German Bunds (as a safe haven) has calmed down.
  • Also the VIX volatility index (the measure of options volatility on the S&P 500) spiked higher by 34% yesterday to its highest since early February. A higher VIX suggests increased demand for put positions (fund managers taking them as a hedge for their long equity portfolio positions). Watch for where the VIX moves as a calming of market fears should reduce the VIX and this would also help to suggest support for equities.
  • In the next few days though the US data will start to come into focus for traders. With ISM Manufacturing (a lead through for economic growth), Non-farm Payrolls (a lead through for the labor market conditions) and Average Hourly Earnings (a potential lead for inflation – especially if productivity remains stubbornly low) all being announced in the next few days this could have a significant impact on the Fed’s views on a rate hike. That means that volatility on the dollar can be expected to remain high in the coming days. Currently the market (as per the Fed Funds futures) is pricing in just a 14% chance of a rate hike in September, whilst it is a 50% chance of coming in December – watch for this moving on the data releases this week.
  • Moving towards the US data, volatility in forex markets remains high, with the Euro still dominating the key moves. Yesterday’s rebound was interesting as it could be that with the fallout from Greece as yet still unknown, perhaps traders were looking at the impact it would have on US monetary policy, as it may be another excuse the Fed has to hold off from hiking rates? There are also interesting moves on the Japanese yen (strengthening) and the Swissy (weakening). The Yen has been seen as a safe haven play, whilst the comments from the SNB’s Thomas Jordan that the central bank would be looking to be active in the market to prevent the Swissy from strengthening have also put pressure on the Swiss franc. There has also been a significant breakout on the Aussie/Kiwi cross where a breakout above 1.1300 has driven continued Kiwi weakness.
  • In commodities, the safe haven gold play has been completely reversed again which is interesting as the yen and German Bund have been bought solidly on the back of the Greece crisis. This suggests that the market may be more interested in the US data driving dollar strength.  The oil price remains rangebound.
  • The economic data is very much US focused this week with the best of the rest including Consumer Confidence and Factory Orders before the 4th July national holiday o Friday. The manufacturing PMIs across the world will have an impact on risk appetite, with China especially interesting. There is also UK services PMI this week which accounts for almost 80% of the UK economy and will impact across sterling.
  •  Watch for: ISM Manufacturing, Non-farm Payrolls, Average Hourly Earnings



EUR/USD – The volatility will remain elevated into the weekend and beyond     

  • Newsflow and rumours surrounding the latest developments on Greece will continue to drive the euro around in the coming days. With such important US data on Wednesday and Thursday the pressure will continue to mount. The
  • I still see the $1.050 pivot as key for the medium term and maintain a reasonably positive view on the euro whilst it is trading above this level. Technical indicators are neutral and the volatility remains elevated.
  • Watch for: ISM Manufacturing, Non-farm Payrolls, Average Hourly Earnings

GBP/USD – A close below $1.5665 continues the corrective slide

  • Cable has developed some near term consolidation due to a lack of catalysts, however this will come to an end this week with a strong of crucial data releases. Strong US data will be a drag on Cable.
  • A band of consolidation between .5650/$1.5800 has formed and with slightly corrective momentum indicators I favour a downside break which would open a move for Cable back towards the support band around $1.5450. The economic data will have a key impact on near term direction this week.
  • Watch for: ISM Manufacturing, Non-farm Payrolls, Average Hourly Earnings, UK Services PMI

USD/JPY – Still expecting a key low in place around 122

  • The safe haven yen play has dragged the price lower, but there is a clutch of dollar data this week that if it continues to improve should help bolster the dollar and drag the pair higher. Furthermore, any positive newsflow over Greece would also be supportive.
  • I have been looking at a key low coming in around 122.00 (the old key breakout level) for a while and on the back of the safe haven play this week there has been a dip. The Fibonacci retracement levels of the 118.86/125.85 rally continue to act as very interesting turning point for intraday trading.
  • Watch for: ISM Manufacturing, Non-farm Payrolls, Average Hourly Earnings

Gold – Continues selling into strength for the gradual drift lower

  • The safe haven play has not really managed to come through and pressure is now back on the range low around $1170 again. There is still a negative correlation with the dollar and with such key US data this week it could be a week of elevated volatility for the gold price.
  • There has been a consistent tendency for rallies to be sold into on gold and then drifting back towards support. However the attrition on the support is gradually pushing the support lower, now around $1170. A test of the June low at $1162 remains the favoured move. Resistance is at $1205.50.
  • Watch for: ISM Manufacturing, Non-farm Payrolls, Average Hourly Earnings

Indices – Sentiment driven by Greece but also by the US data to a certain extent

  • S&P 500 – Losing the support at 2070 is a concern but needs a two day close below to suggest the market is accepting the move. A broken sequence of gradual higher lows is  blow for the bulls but the big support comes in at 2040, the March low. The negative sentiment from the Greek crisis will weigh on Wall Street, but if the US data is positive this week then it could have a stabilizing impact.
  • DAX Xetra – Huge volatility continues, but whilst the support around 11,800 remains intact then the outlook will not be bearish for the DAX. There will be continued flying around in the next few days, with rumours of developments over Greece continuing to have an impact. Until the uncertainty is removed, expect this to be the case.
  • FTSE 100 – The close below 6625 looks set to be a two day close below which is a real concern now for traders. With momentum indicators negative the outlook is under real pressure now. FTSE 100 will be dragged around by sentiment over Greece though and until the situation is resolved either way it will be difficult to confirm how long lasting the impact on sentiment is.



Tuesday 30th June

  • Canada – GDP
  • US – Consumer Confidence

Wednesday 1st July

  • China – Manufacturing PMI
  • Eurozone – Manufacturing PMI
  • UK – Manufacturing PMI
  • US – ADP Employment Report
  • US – ISM Manufacturing
  • US – Crude Oil Inventories

Thursday 2nd July

  • UK – Construction PMI
  • US – Non-farm Payrolls
  • US – Average Hourly Earnings
  • US – Factory Orders

Friday 3rd July

  • China – Services PMI
  • UK – Services PMI



Monday 6th June

  • US – ISM Non-Manufacturing PMI

Tuesday 7th June

  • Australia – RBA monetary policy + statement
  • UK – Manufacturing Production
  • US – Trade Balance
  • US – JOLTS job openings
  • G8 Meeting

Wednesday 8th July

  • UK – Annual Budget
  • US – Crude Oil Inventories
  • US – FOMC meeting minutes

Thursday 9th July

  • Australia – Unemployment
  • UK – BoE monetary policy
  • US – Weekly Jobless Claims

Friday 10th July

  • UK – Trade Balance
  • Canada – Unemployment

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