Weekly Trading Notes: Ready to kick the Greek can down the road again


  • This could be the week that finally brings an end to the tedious uncertainty over whether Greece will default or not. Prospects of a Greek deal with its creditors have improved significantly in the past few days, but there is still work to be done. On Wednesday the leading figures will all meet up again to try to come to an agreement. Time is running out as on 30th June Greece owes the IMF €1.6bn and needs the €7.2bn final tranche of bailout money.


  • Hold on though, apparently the new proposal focuses on raising taxes (such as VAT) and a commitment to raising the retirement age. It would appear as though there is nothing substantial that will help Greece out of this huge hole it finds itself digging in. The aim would appear to be to make Greek public finances add up, rather than to be sustainably paying down the debt (of course that would need some sort of drastic debt re-profiling). So it is a case of just kicking the Greek can ever further down the road. Where the Eurozone is concerned, no surprise there then. However, no deal is done yet and it is by no means simply a  formality, although markets have not taken it that way. Let’s just hope that there is a deal as the fallout could be messy, both near term and longer term.
  • For now though, markets love it. The removal of uncertainty (if that is what it is) can do wonderful things for trading sentiment. Equity markets have pushed strongly higher, whilst recent safe haven trades such as long positions on the yen, gold and the German Bund have been unwinding.
  • This has a big impact across markets. With Treasury also rising again, the dollar has been in rally mode again. The Dollar Index has picked up and for now the crucial support at 93.25 (broadly equates to the resistance of $1.1465 on EUR/USD) remains intact. The euro may now be in retreat towards the $1.1050 pivot level once more, whilst Cable has rolled over and Dollar/Yen is threatening a rally again. The key forex majors are making some very interesting moves.
  • Furthermore, the biggest impact of Greece has been on the Eurozone equities, such as the DAX and CAC, as the significant volatility continues. Both have rallied sharply on the news of a possible deal and look strong to turn around the corrective outlook that has dominated these markets since the mid-April highs. The S&P has been relatively insulated from the volatility, with a more controlled recovery (the preceding sell-off has been nowhere near as severe though).  The S&P 500 is now once again within touching distance of its all-time highs again. FTSE 100 has also been less volatile but the underwhelming index has been far more impacted due to its proximity to the Eurozone.
  • Commodity prices have remained fairly rangebound. The spike higher in the gold price which came last week as it seemed as though Greece was spiralling towards default has been unwound as the proposed deal has been submitted by Greece. With the safe haven trade unwinding then the gold price is likely to move back towards its negative correlation with the US dollar. The oil price remains stuck in its tight range.
  • The economic data is a touch tight this week, but in any case the developments on Greece would dominate in any case. The Personal Consumption Expenditure will certainly be eyed, being the Fed’s preferred inflation measure. This could be a calm before a storm of data once more next week. The German Ifo Business Climate will also be looked upon as a key indicator of German economic growth. The final read of Q1 GDP will also be of interest, but by now the Q1 disappointment is a little too backward looking to make too much of an impact.
  •  Watch for: German Ifo Business Climate, US Personal Consumption Expenditure



EUR/USD – The rangebound conditions are likely to continue     

  • Reports of the euro being used as a carry trade (borrow euros to buy other assets) has driven the euro lower on Tuesday. However this remains a rangebound play with the huge resistance at $1.1465 still intact. Outside of Greece, look towards the German Ifo as a driver of intraday volatility on Wednesday, whilst the US PCE data will do the same on Thursday, perhaps to a bigger degree.
  • Continue to see this as a range play between the pivot level at $1.1050/$1.1465. Near term support band $1.1150/$1.1200 as momentum indicators have rolled over and turn a touch more corrective.
  • Watch for: German Ifo Business Climate, US Personal Consumption Expenditure

GBP/USD – Watch for corrective forces growing whilst under $1.15800

  • The strengthening dollar has impacted across sterling near term and this may induce some profit-taking after such a strong recent move. The PCE data is certainly going to have an impact as it is the Fed’s preferred measure of inflation.
  • The rally is in consolidation and is threatening a correction. A small near term top below $1.5800 implies $1.5700 however it is interesting to see the moves on Cable in recent months it does tend to trend in one direction for a while. Therefore if momentum gets behind a correction it could move sharply. Key support around $1.5450.
  • Watch for: German Ifo Business Climate, US Personal Consumption Expenditure

USD/JPY – Consolidating between key Fibonacci levels

  • The respective inflation data could drive the pair out of a consolidation phase. However, the very recent rebound suggests that the dollar bulls are gathering momentum again. A positive read trhoguh on the PCE data on Thursday could continue to drive this move.
  • The Fibonacci retracements of the 118.86/125.85 rally have been containing the trading for the past two weeks. The 50% levela t 123.35 is the floor, whilst 23.6% at 124.20 is broadly the ceiling. This means a 180 pip range consolidation that is looking for a breakout. Momentum is beginning to urn more positive again from a previous corrective outlook. The potential for a key higher low having formed around 122.40 is growing.
  • Watch for: US Personal Consumption Expenditure, Japan CPI

Gold – False moves suggests continued consolidation

  • The safe haven drive of the past week dragged the gold price back into the middle of the old consolidation band $1175/$1224, but as this has unwound the pressure is beginning to creep back to the downside. The absence of a safe have appetite (i.e. if the Greece deal comes through) should re-engage the negative correlation dollar trade. This would mean watching the US PCE data and should mean that next week’s key releases become major driving forces once more.
  • The apparent false downside break that was followed by a sharp retracement of a bullish rebound means that we are almost back to square one with gold. The range lows around $1175 are once more supportive but the range trading momentum signals are back in place. Once more we look for the key catalysts.
  • Watch for: US Personal Consumption Expenditure, the resumption of the negative correlation with the dollar

Indices – Sentiment driven by Greece but also the US PCE data

  • S&P 500 – lower volatility but close to a breakout again. Finally earnings season is in sight over the horizon and considering the lack of positive drivers in recent weeks the S&P 500 has performed very well. With strong support in at 2070,m pressure on the key resistance at 2135 should be seen.
  • DAX Xetra – huge volatility continues and quite simply it is almost a binary bet over whether Greece gets its deal or not. If the deal is done then you can expect a significant rally, if not then the selling pressure will see a huge reversal. The market is currently positioned for a deal. Key resistance at 11,910.
  • FTSE 100 – the market has rallied (although not by anywhere near as much as the DAX or CAC), with now a rally above the resistance at 6870 being a big signal to suggest the bulls are in control near term. Medium term there is less of a strong move, with the index having broadly moved sideways over the past 5 months. I am far more positive on FTSE 100 with a Greece deal in place, if not then the bears could be pressurising the key 6625 low very quickly.



Tuesday 23rd June

  • US – Durable Goods Orders
  • US – Flash Manufacturing PMI
  • US – New Home Sales

Wednesday 24th June

  • Eurozone – German Ifo Business Climate
  • US – GDP (final Q1)
  • US – Crude Oil Inventories

Thursday 25th June

  • US – Weekly Jobless Claims
  • US – Personal Consumption Expenditure

Friday 26th June

  • Japan – CPI
  • Eurozone – German CPI (prelim)
  • US – University of Michigan Consumer Sentiment (revised)


Monday 29th June

  • Eurozone – German flash CPI

Tuesday 30th June

  • UK – Final GDP
  • UK – Current account
  • Eurozone – Flash CPI
  • 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


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