Weekly Trading Notes – Greece is still the main concern despite a raft of data


  • The Greek negotiations with its creditors is a key driving force on sentiment as the deadline for the €300m repayment draws ever closer. Key players from Greece’s creditors (Merkel, Hollande, Lagarde and Draghi) have been meeting in an attempt to draw up some sort of proposal of a deal. As yet the Greeks have been providing very vague proposals apparently, thick with ideology and thin on detail. The gamble is that no-one wants a Grexit and it seems to be holding out for a good deal. My feeling remains that there will be an agreement that prevents a default. There is still little clarification as to whether 5th June is a real deadline or whether Greece can bundle all its repayments to the MF (c. €1.5bn) until the end of the month. Expect an adverse reaction if 5th June deadline is missed, but it may not be the end of the road. Ultimately, newsflow on Greece is likely to drive volatility on the euro in the coming days.


  • The Eurozone is back into inflation once more. The economic data has been improving in recent months and this was confirmed with a better than expected flash CPI for May (+0.3% versus +0.2% forecast). This means the Eurozone is in inflation for the first time for 6 months. This is a positive for the euro as it reduces the need to extend the ECB’s QE programme. However this is also impacting across Eurozone equities (DAX suffering) and bonds too. This week’s ECB meeting will be interesting to see how the frontloading of QE purchases is progressing for the ECB, with Draghi’s press conference as usual of most interest.
  • US economic data remains key to markets, as yesterday’s volatility went to show. With a raft of core tier 1 economic data for the States this week the volatility will continue. With ISM Manufacturing picking up for the first time since October there are signs of improvement. The ISM Non-Manufacturing needs to remain stable too, however the important figure is Non-farm Payrolls (and average hourly earnings growth). Payrolls need to stay above the 200,000 level (generally considered to be the level at which the economy is adding jobs on a net basis), whilst average earnings (currently stubbornly c. 2%) need to start picking up for the Fed to consider the implications of rising input costs for inflation down the road.
  • The Dollar Index has been fairly volatile but rangebound for the past week. A strengthening euro is putting near term pressure on today but with significant overhead resistance now at $1.1065 for EUR/USD the dollar hay begin to find support again.
  • Gold and silver have been consolidating for the past few days as this consolidation on the dollar has continued. It is as though traders are looking for a catalyst. Remember that Non-farm Payrolls will invariably have a sizeable impact (negative correlation with the dollar moves) on the precious metals.
  • The OPEC meeting this Wednesday is clearly the focus for the oil markets. There is little expectation that OPEC will cut production levels (which are actually rising due to Angola increasing production). Rhetoric from Saudi Arabia as ever will be crucial as it provides around a third of OPEC’s production of just over 31bn barrels per day.
  • Equity markets are taking sentiment off Greece currently (especially the DAX) and the more the uncertainty continues the more than supports will be pressured.
  • The economic data comes thick and fast this week with all the services PMIs a big focus on Wednesday (China, Eurozone, UK especially and major focus on US ISM Non-manufacturing). Labor market data dominates the backend of the week with the ADP report, Weekly Jobless Claims and of course Non-farm Payrolls.
  •  Watch for: ECB monetary policy, ISM Non-Manufacturing, Non-farm Payrolls



EUR/USD – Looking to for another key high around $1.1065 resistance      

  • The euro is volatile with attention still on Greece, but the volatility is also being driven by the mixed economic data. The market is coming to terms with higher than expected Eurozone inflation but ultimately the dollar strength will come through once more.
  • Today’s rally is now right up towards resistance at $1.1065 and I am now looking for sell signals. Ideally wait for this rally to play out as there should be limited upside with such overhead supply around $1.1065. Only above $1.1210 would defer the bearish outlook.
  • Watch for: Greece developments, ECB, ISM Non-Manufacturing, Non-farm Payrolls

GBP/USD – Bears are in control so use rallies towards $1.5300/1.5450 as a chance to sell

  • UK economic data seemingly has become as mixed as the US, with no upward revision to Q1 GDP, and a disappointing Manufacturing PMI. The raft of US data this week gives an opportunity for further volatility. The Bank of England is unlikely to do anything unusual on Thursday so the focus will be on all the US data now.
  • The near term outlook remains very weak technically and selling intraday rallies remains a good strategy. The level of resistance now overhead between 1.5300/1.5450 is significant and should any technical rally set in I would look for sell signals in this band.
  • Watch for: ISM Non-Manufacturing, Non-farm Payrolls

USD/JPY – Be mindful of a loss of momentum and a correction towards 122 breakout

  • With little real change in Japanese monetary policy hints, the focus in on the US data this week.
  • The breakout implied 125.70, which remains on, however I am cautious as the gains of the past few days have coincided with a lack of confirmation on momentum indicators. There is no explicit sell signal yet but be careful chasing this too much to the upside (especially in too much size). Watch for reaction lows coming under pressure (latest at 123.85), also the 89 hour moving average as a basis of support.
  • Watch for: ISM Non-Manufacturing, Non-farm Payrolls

Gold – Range is intact but watch for a catalyst… probably Non-farm Payrolls

  • The negative correlation is still in place, but the gold traders are looking for a true catalyst. In recent months the Payrolls report has driven the gold price moves (negative correlation to the dollar), especially on significant surprises.
  • The range between $1178/$1224 continues, with near term momentum signals suggesting a slight bearish bias but in truth the market is waiting for a catalyst, which is likely to be a run of US data surprises, or just Non-farm Payrolls.
  • Watch for: US data to drive the dollar trade with a negative correlation to gold.

Indices – Wall Street driving off expectations of Fed policy, Europe moving off Greek developments

  • S&P 500 – consolidation has set in, but there is no threat to the general positive sentiment yet (needs a breach of the May low at 2068 for that). A trend of higher lows continues.
  • DAX Xetra – Volatility remains elevated, which is not generally a positive for the DAX. Greece newsflow is also impacting on sentiment. The 11,167 May low support is key, whilst the pivot range 11,620/11,710 is now resistance.
  • FTSE 100 – Sentiment could be deteriorating with short term corrective signals and a breach of the support at 6930. As with all the indices, the May low is key, at 6810.



Tuesday 2nd June

  • US – Factory Orders

Wednesday 3rd June

  • Australia – GDP
  • China – Services PMI
  • Eurozone – Services PMI
  • UK – Services PMI
  • Eurozone – Unemployment
  • OPEC Meeting
  • US – ADP Employment Report
  • Eurozone – ECB monetary policy + press conference
  • US – Trade Balance
  • US – ISM Non-Manufacturing PMI
  • US – Oil Inventories

Thursday 4th June

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

Friday 5th June

  • US – Non-farm Payrolls
  • US – Unemployment rate
  • US – Average hourly earnings



Monday 8th June

  • China – Trade Balance

Tuesday 9th June

  • China – CPI
  • UK – BoE Inflation Report hearings
  • US – JOLTS job openings

Wednesday 10th June

  • UK – Manufacturing Production
  • US – Oil Inventories
  • New Zealand – RBNZ monetary policy

Thursday 11th June

  • Australia – Unemployment
  • China – Industrial Production
  • China – New Loans
  • US – Retail Sales
  • US – Weekly Jobless Claims

Friday 12th June

  • US – PPI
  • US – University of Michigan Consumer Sentiment (prelim)


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