On a morning where traders are increasingly cautious over Greece, key forex markets such as with the euro, sterling and yen are showing very little direction. My newswires and data feeds are showing a series of conflicting reports and headlines over progress in the negotiations. The intraday volatility where markets have fluctuated higher and lower suggests to me that no-one really knows how to be positioned at the moment. The markets are trading with great uncertainty and I think that it may just be best to just keep your powder dry.
There have been a number of infuriating false dawns in recent weeks. Earlier in June, the Greeks were claiming that a deal was imminent, that turned out to be clearly not to be true. Then a classic case in point came over the last weekend, with a proposal that was submitted by the Greeks that was supposedly very promising, but once more the eurphoria that greeted the news appears to have been unfounded. Subsequent meetings on Monday and Wednesday this week have come and gone, with no deal agreed. We still await any substantial positive news of a deal.
Greece wants to implement tax hikes. The creditors want spending cuts and alterations to pension and working age regulations. Ultimately, the creditors are wise to the fact that Greece has historically struggled with the collection of its taxation and they want to see more concrete and binding proposals that can be administered with more certainty.
The newsflow on the progress of the negotiations has been conflicting, which has driven the euro to fly higher higher and lower, but without any real trend. An interesting factor from a technical analysis point is that the near term support around $1.1150 continues to remain intact. The intraday rebound on the DAX is reflecting hope. Furthermore, the 10 year Bund yield is rising again which suggests that there is still hope in the market for a deal. (a rising yield menas selling pressure on Bunds, whils tthe Bund is seen as a safe haven trade during times of uncertainty). The yield has ben trading around a 0.820% pivot level in recent days and pulling back higher again suggests a move away from the safety of the Bund again. This level could become an interesting indicator of market sentiment in the coming days.
However, for now I still see this as all intraday noise. Markets have been pulled back and forth so often over the past few weeks that perhaps I can be forgiven for appearing a touch more reserved. There are still a few trading days to go until Tuesday 30th June which is supposedly the deadline day for Greece’s repayment. Something tells me there will be a few more twists and turns to come yet.
I am still expecting that the Eurozone will do what it does best – kick the can down the road at the eleventh hour. In the meantime, though there will be more noise, back and forth, too and fro, until the deal is finally done. As the intraday fluctuations continue around the rumour mill, I prefer to keep my powder dry for now.