Eurozone leaders have needed to talk all through the night and it seems as though we have some sort of agreement on how Greece can avoid a Grexit. The issue of trust seemed to be rather a sticking point as the creditors are worried whether Greece will actually implement the changes that are necessary that comes as part of a deal. A series of laws in Greece need to be passed before Wednesday night apparently in order to secure a third bailout that would provide the funds needed as part of what will be a third bailout of somewhere between €55bn to €85bn potentially. Legislation on tax hikes, labour market reforms and on pensions are all likely to be needed, whilst the privatisation of some state owned assets seem to have been a sticking point.
The agreement has come just before the open and markets now begin Monday morning open on the front foot. Equity markets in Asia were broadly positive overnight, whilst the rebound continues in China (even though half the market is still not yet trading). European markets are slightly more cautious in early moves. In forex markets, major pairs are giving back some of their gains from Friday, again looking rather cautious. In the oil space, prices have opened weaker as it appears that Iran are close to a deal over its nuclear sanctions and this could free up Iranian supplies once more.
On the economic calendar there nothing for traders to focus on sot eh reaction to Greece will be the main driver.
Chart of the Day – Silver
I have been caught out a touch before with possible bull recoveries fading quickly on silver as the selling pressure once more resumed. However the downtrend on silver is once more under pressure. Even though the conditions for a recovery were not confirmed last time, I am still more reticent from considering the prospects that a rally is sustainable. The rebound has dragged the price back into the resistance band $15.50/$15.80, whilst the three day move is also once more merely up to the resistance of the falling 21 day moving average which has capped the gains excellently in the past month and today at $15.74 has again provided the ceiling. The RSI has unwound to a level at which the sellers have returned in recent weeks and this looks once more to be a chance to sell. The only nagging doubt I have is the impressive bullish divergence on the daily Stochastics. This is currently something of a lone indicator showing a potential rally is on. However with the history of bears selling rallies on silver in the past month. I expect initial support at $15.25 to come under pressure before $14.65 once more.
The apparent euphoria of Friday’s trading suggested that it was a done deal for Greece, but with leaders apparently coming to an agreement on Monday morning the confidence that had been tested in the Asian session is returning. Still, the technical outlook has certainly improved following a strong bullish candle on Friday. The momentum indicators have ticked higher but still remain in rather neutral configuration. Taking a step back, the euro is actually holding up remarkably well despite the erstwhile uncertainty. With the clarity there should be gains on the successful resolution, although markets still seem a touch reticent. The near term supports come in at $1.1078 and $1.0990 whilst $1.10915 is the key near term low. Friday’s high at $1.1215 is the initial resistance before $1.1278 being key.
Cable has been trending lower with a series of lower highs and lower lows since 22nd June, however the sharp rally from Friday is now seriously testing that downtrend. The move has resulted in a pick-up in the Stochastics which is close to giving a buy signal, whilst the MACD has also now unwound back to neutral and it will be interesting to see if this also starts to bottom out too. The intraday hourly chart looks to be aligned with the improving outlook as the move on Friday took the hourly RSI above 70 for the first time since the downtrend began in mid-June, whilst the hourly MACD lines are also in much more positive configuration. This all suggests that the bulls are possibly on the brink of a sustainable turnaround. Friday’s high at $1.5550 (incidentally which is a historic pivot level) is important near term whilst also the 50% Fibonacci retracement of $1.5188/$1.5928 comes in at $1.5558. So there is a confluence of resistance just overhead that needs to be overcome. The initial support is at $1.5465 which interestingly enough is around the 61.8% Fib level at $1.5471.
The uncertainty of the negotiations over Greece has also pulled Dollar/Yen around in the few sessions. The huge sell-off of Wednesday last week which left us with an apparently decisive bear candle has now been completely undone by two days’ worth of rally. The result has been another turnaround in sentiment but as things stand we are still no closer to a decisive trend or outlook. The reality is that the yen is the safe haven currency of choice for traders and with talks seemingly successfully resolved the safe haven trade is unwinding. Friday’s high at 122.88 is the immediate resistance being tested, above which 123.72 is key. The overnight opening low at 122.00 (yes once more supportive) is the initial floor, with 121.17 and 120.38 acting as further levels of support.
The last few days has been somewhat curious for gold, which has seemingly lost its safe haven status (at least for the time being). The technicals though continue to show gold in a series of lower highs and lower lows, whilst rallies continue to be sold into. The price continues to trade under all the falling moving averages and the momentum indicators retain a bearish configuration. I do not see the turn higher on the Stochastics as anything to get too excited about on the bull side quite yet as whilst the price is trading below the old range floor at $1170, the outlook will remain rather negative. The rebound high at $1174.70 is the initial level that the bulls will need to breach on a closing basis to suggest the outlook is beginning to improve, however there is further resistance overhead at $1186.90 to overcome too. I will continue to use these rallies as opportunities to sell for a retest of $1146.75 before the likely pressure on the key March low at $1142.85.
Having looked to be breaking out of a near term consolidation pattern which would have formed a four day base pattern on the hourly chart, Friday’s trading was disappointing for the bulls. The attempted break could not last the distance and pulled back into the pattern almost as soon as it had broken out. The prospects of a base pattern have not been scuppered yet though as the pattern could still be building, so needs to be watched for now as the consolidation continues. However, as trading has resumed after the weekend, further downside pressure is growing once more and the support around $50.93 and $50.58 be under pressure. These two levels are key now as a break down wold continue the correction back towards the implied target of $49.50. Watch the hourly RSI for a possible early signal, as a move back below 30 would be bearish now.