20/02/2015: All eyes once more on the Eurogroup with Greece running out of time

Market Overview

So we move to a third Eurogroup meeting of the Eurozone finance ministers in an attempt to finally come to an agreement with Greece over how to deal with the end of its bailout program which expires on 28th February. Whilst it is still possible that the situation could drag on beyond today the argument will be that the clock is ticking and time is running out Greece wants a loan extension which a reduction in austerity measures, whilst German finance minister Schaueble has refused this and wants Greece to stick to its bailout terms. So, who is going to blink first. Conventional wisdom suggests that it will have to be Greece, but who knows with the maverick Greek finance minister Yanis Varoufakis at the table. I am of the opinion that we will get the usual fudge out of the Eurozone that will kick the can further down the road. Remember the Eurozone is more of a political entity than an economic one.

Equity markets remain fairly sanguine about the whole uncertainty over Greece and the Eurogroup, with the DAX yesterday at an all-time closing high of 11,001. Wall Street rebounded from earlier weakness to close only slightly lower, with the S&P 500 down 0.1%. Asian markets continue to trade mixed on light volume due to the lunar new year. The Nikkei closed 0.4% higher, despite a slight miss on the flash Manufacturing PMI. The European trading session has begun mixed as once more investors are faced with the question of whether FTSE 100 will be able to make and sustain the key breakout.

This has become an incredibly quiet period for forex trading. Euro, sterling and the yen have all been quiet, with only sterling making gains of any note this week. The consolidation on the Dollar Index subsequently continues. Traders will be watching out for UK Retail Sales today at 0930GMT. Despite an expected slight month on month dip by 0.1% the year on year reading is expected to improve to +5.9%. Sterling tends to react to the retail sales data. Early in the European session there are the Eurozone flash PMIs, with the regional data at 0900GMT which is expected to show another slight improvement to 51.5 (from 51.0). The US flash PMI is this afternoon at 1445GMT and is expected to dip slightly to 53.6 from 53.9. The Eurogroup meeting starts at 1500GMT.

Chart of the Day – Silver

We see a similar picture on silver to what we do with gold as the bears seem to have retaken control once more. The sequence of lower highs and lower lows suggests that selling into strength is the best strategy. A series of big bearish candles during the past few weeks have been responsible for taking silver lower, with the interim period punctuated by largely neutral, indecisive candles. The momentum indicators on the daily chart continue to deteriorate, whilst the moving averages are all rolling over and there is a combination of the 21 and 144 day moving averages providing resistance. On the intraday chart, although silver has not got the well-defined 4 week downtrend that is present on the gold chart there is still a key sequence of lower highs. Use any intraday rallies as a chance to sell. The latest high comes around $16.80 which is an old intraday pivot level that goes back for several months. I expect the bears to test $16.23 before further decline back towards the key support area around $15.50 in due course. Above $17.43 is needed to break the sequence of key lower highs.

Silver   20022015

EUR/USD

The euro continues to trade in a very tight range and the range is getting tighter as time goes on without any definitive news out of the Eurogroup meeting with Greece. The daily chart shows the euro has been in the doldrums now for almost two weeks as the indecisive candles continue to mount. A range between $1.1260/$1.1530 just cannot be broken. The intraday hourly chart is a touch more interesting with this range actually being tightened to $1.1320/$1.1450, with the intraday RSI potentially being used as an indicator to play the extreme levels of the range, buying the hourly RSI towards 30 and selling around 70. The truth is though I see this range play continuing until there is a resolution over the Greek issue. This might come today, but with a 3rd meeting of the finance ministers. An agreement between the sides would boost the euro, whilst an acrimonious failure would put selling pressure on.

EURUSD   20022015

GBP/USD

Sterling is moving in a generally positive way, but at the moment it cannot seem to put a string of bullish candles together. This suggests a considered advance which could also suggest some decent grounding to the bull control. We continue to see the momentum indicators improving whilst the 21 day moving average is still seen as a basis of support and currently rises at $1.5235 (interestingly this is now above the $1.5200 key support too now). The hourly chart shows consolidation yesterday and also the rate holding on to the top of a minor breakout support at $1.5400. The key near term support for this bull run now comes in at $1.5300 which is an old breakout and just below Tuesday’s reaction low. I still expect the bulls to remain in control for further upside back into the $1.5485/$1.5620 congestion area.

GBPUSD   20022015

USD/JPY

Dollar/Yen has also settled into a range of consolidation in the past week. The support has held around 118.30, but any attempts at the dollar bulls regaining control have been rebuffed. Momentum indicators have a very slight bullish bias but nothing that you would want to put your house on, as an extremely neutral candle posted yesterday has continued into today. The daily trading volume has been generally lower in recent days but nothing too significant yet despite the lunar new year being celebrated in some Asian countries. However, the hourly chart shows how benign the pair has become with hourly moving averages all but flat and hourly momentum indicators neutral. We now must wait for a decisive break either below 118.30 support or above 119.40 resistance in order to garner some direction.

USDJPY   20022015

Gold

I spoke yesterday about the bull hammer candlestick pattern that was left on Wednesday and I said about how important it is (especially in bear market runs) to follow this up with a positive candle to affirm who is in control. Well it looks like the bears still have this one. I have been looking for another lower high probably to come in the band of resistance $1216.50/$1225.10 and with yesterday’s high at $1223.10 prior to an intraday decline that has left a big bearish candle, it looks like the lower high has now been left. The momentum indicators on the daily chart remain bearish and the downside pressure continues. I expect further pressure on the low at $1197.55 before further weakness to test the old crucial floor at $1180.70 and then a likely retest of $1168.25. The intraday chart shows a consistent posting of lower key highs and in this way look to use any rallies as a chance to sell. The key lower high at $1236.50 needs to be breached for the bulls to register any sort of fight back.

Gold   20022015

WTI Oil

Absolutely no let-up in the volatility in WTI. Looking at the daily chart you would be forgiven for questioning that statement, but on an intraday basis there continues to be huge swings in the price movement. The daily chart shows that for a third time the 21 day moving average (currently $49.42) seems to be providing very good support during February. The price is therefore still in this broad consolidation between $47.36/$54.24, which when you look at ta percentage move is a range of over 12%. The daily technical indicators are still improving but may just be showing signs of a bit of fatigue as this range continues. Looking at the intraday hourly chart with this range, I am still very interested in the Fibonacci levels of the $54.24/$47.36 correction. The 61.8% level around $51.60 caught an intraday spike higher yesterday. Furthermore, you can continue to use the classic overbought/oversold signals on the hourly RSI to trade WTI.

WTI   20022015

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