Weekly Trading Notes – Greek reforms at the forefront of concerns for markets


  • The Eurogroup is meeting once again in an attempt to resolve the issue over Greece’s economic reform proposals. Greece needs the final €7.2bn bailout tranche to pay debts and public sector workers. The payment of €745m is due to the IMF tomorrow and as things stand it is unlikely to be able to pay it. A missed payment tomorrow does not necessarily mean default as Greece would then have at least another month’s grace period. However it would send out a significant message and not look especially positive for the euro. The negotiations over Greek reforms is again a concern for markets.
  • The dollar has been under pressure in recent weeks but the last few days has been finding some support again. The sharp increase in Treasury yields has started to stabilise as well and this is now a moment where the consolidation suggests the outlook for the dollar could tip either way again. EUR/USD has been pressured and needs to hold above support at $1.1065, but Cable is strong in the wake of the UK General Election. The Kiwi dollar is under pressure as speculation grows of a potential rate cut by the RBNZ, whereas the Aussie has been supported because the RBA has suggested that perhaps rate cuts may be on hold for now.
  • The UK General Election result has given a boost to UK assets. The Conservatives now have a majority and they are deemed to be more market friendly and positive for investors, whilst also being seen as being more serious at getting to grips with deficit reduction. Sterling has been outperforming forex majors, whilst the FTSE 100 has also been boosted. The outlook for UK Gilts should also be boosted as the outlook for the UK economy would have benefited. The only real caveat is the prospect of an EU referendum, but this will be played out in the months ahead rather than the immediate time horizon.
  • Commodity prices have been interesting in recent days. The price of oil has come under a little corrective pressure as the dollar has strengthened in the past couple of days. This comes despite the announcement that the weekly change in US oil inventories was negative last week. This negative move was the first since early January and suggests that there may finally be some sign that oil supplies will not continue to soar. Interestingly, like the price of EUR/USD, the WTI Oil price is on the brink of a key support, but is so far holding on to the support around $58.30. In the precious metals space, the negative correlation to the dollar appears to be breaking down. Despite the dollar movement both lower and higher in recent days, the prices of gold and silver are barely reacting, instead continuing to look for the next catalyst.
  • Non-farm Payrolls created a mixed reaction with little real direction garnered. The report was a mixed bag. Although the payrolls recovered back above 200,000 again along with a drop in the unemployment rate to 5.4%; however there was a sharp downward revision to last month’s data, whilst earnings growth remains a struggle. All in all the inference has been that the Fed is unlikely now to be hiking rates until Q4 at the earliest.
  • US economic data could be key this week again, with a raft of releases due. The focus will be on Retail Sales which has been disappointing in recent months, with a succession of missed expectations and falling year on year data. The Retail Sales data has been a significant driver of sentiment in recent months and this could continue to be the case this week.
  • In other events, watch for the China Industrial Production, the Bank of England’s Quarterly Inflation Report and the US Michigan Sentiment which could help to drive risk appetite.
  • Watch for: US Retail Sales, BoE Quarterly Inflation Report



EUR/USD – A decisive breach of support at $1.1065 would abort near/medium term bull control    

  • Concerns over Greece has resulted in another bout of underperformance from the Euro. This could come to a head in the coming days if the Eurogroup do not come to an agreement with Greece over economic reform proposals and Greece subsequently is unable to repay the IMF. However, if this is dealt with then the continuation of the rebound could resume as the prospects of the Eurozone economy have picked up as data releases (PMIs and inflation) have improved.
  • The big near term test is the support at $1.1065 which is the 5th May low. Whilst above this support then the outlook for a recovery remains positive and the bulls can look towards $1.1450/$1.1530 resistance band.
  • Watch for: Greece & Eurogroup developments, US Retail Sales

GBP/USD – Pressure on resistance band at $1.5550

  • Sterling has been significantly buoyed by the Conservatives winning a majority. With US data average at best currently the conditions are set for a continued sterling run higher. Sterling is now beginning to outperform other forex majors too. The Bnak of England’s Quarterly Inflation Report is a big driver of sterling and any suggestion of improved growth or inflation prospects would be a boost for sterling.
  • The resistance at $1.5550 remains key as a decisive breakout would completed a 4 month base pattern and suggest a strong sign of intent by the bulls. The key support is now at $1.5090 and technical studies (momentum indicators) point to further upside pressure this week.
  • Watch for: Bank of England QIR, US Retail Sales

USD/JPY – Range trade continues between 118.30/120.85 (pivot around 119.40)

  • With expectations of rate hikes by the Fed being scaled back the dollar has been unable to regain the initiative. It is interesting that the safe havens of both the yen and gold have spent the past few weeks consolidating.
  • There is little sign of a breakout, with support coming in at 118.30 and up towards the resistance at 120.84. There are tighter levels within the range, whilst the medium term pivot level at 119.40 continues to play a consistent role as a turning point in the range.
  • Watch for: US Retail Sales, Michigan Sentiment

Gold – The range between $1170/1224 continues

  • Gold is another rangebound safe haven play. The negative correlation relationship with the US dollar seems to have taken a break for the time being, but watch for when this relationship resumes.
  • The range continues to be extended downwards (this week by another $5) but the closing support remains above $1178. There is a slight bearish bias within the range with the price now consistently below $1200. Momentum is broadly neutral and nothing is really calling for an imminent breaking of the range. We wait for a catalyst for a breakout as even Non-farm Payrolls has been unable to inspire a key move, perhaps US Retail Sales could help.
  • Watch for: US Retail Sales

Indices – Wall Street challenging the highs, DAX top pattern intact, FTSE prospects improving

  • S&P 500 – With no significant improvement in Non-farm Payrolls on Friday the S&P 500 took a boost from the likelihood that the Fed would not be imminently tightening monetary policy. The all-time high is back within range again and could be broken this week. A range play has been a feature of recent weeks, but corporates remain concerned by the strength of the dollar, whilst Janet Yellen’s assertion that the market valuations were looking generally quite high could also encourage profit taking if there is a breakout. Resistance at 2126.
  • DAX Xetra – The head and shoulders top pattern below 11,620 still implies 10,850. The sharp DAX rally has again coincided with a euro correction as the negative correlation continues. The pullback rally could still just be another chance to sell, especially if the euro continues to find support. Above 12,079 to abort the pattern.
  • FTSE 100 – Despite the Conservative victory in the election the FTSE has been so far unable to move for a break into further all time high ground. The resistance therefore remains in place at 7122. However there is now a good band of support 6765/6810 to build from. The technical indicators remain positive and dips are being bought into.



Tuesday 12th May

  • UK – Manufacturing Production
  • US – JOLTS job openings

Wednesday 13th May

  • China – Industrial Production
  • Eurozone – Germany GDP
  • Eurozone – GDP flash
  • UK – Unemployment & Average earnings
  • UK – Bank of England Quarterly Inflation Report
  • US – Retail Sales
  • US – Crude Oil Inventories

Thursday 14th May

  • US – Weekly Jobless Claims
  • US – PPI

Friday 15th May

  • US – Empire State Manufacturing Index
  • US – Industrial Production and Capacity Utilization
  • US – University of Michigan Consumer Sentiment (prelim)



Monday 18th May

  • US – NAHB Housing Market Index

Tuesday 19th May

  • Australia – RBA meeting minutes
  • UK – CPI
  • Eurozone – ZEW Economic Sentiment
  • US – Building Permits
  • US – Housing Starts

Wednesday 20th May

  • Japan – GDP (prelim)
  • UK – BoE meeting minutes
  • US – Flash Manufacturing PMI
  • US – Crude Oil Inventories
  • US – FOMC meeting minutes

Thursday 21st May

  • China – Flash Manufacturing PMI
  • Eurozone – Flash Manufacturing PMI
  • UK – Retail Sales
  • US – Weekly Jobless Claims
  • US – Philly Fed Manufacturing Index
  • US – Existing Home Sales

Friday 22nd May

  • Japan – BoJ monetary policy
  • Eurozone – German Ifo Business Climate
  • US – CPI
  • Canada – CPI


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