Forex News and Events:
With the Goldman Sachs story clearly fading from the markets collective memory and meteorology bugs sent back to the weather channel, investors once again had time to focus on Greece. Yesterday Greece raised €1.95 billion ($2.63 billion) through a 3-month Treasury- bill auction to yield 3.65%. While demand was firm and temporarily soothed investor concerns, today the 10yr yields climbed over 8.00% highlighting persistence fears. While Greece is reported to have the cash to pay its April debt, there are real worries regarding how the €8.5 billion bond, which matures on May 19th will be covered. While Soros' comments regarding Greece's death spiral might be a tad extreme, there are still considerable barriers ahead of a meaningful resolution. In addition, ECBs Weber clarified that the €80bn Greece needed to avoid default was not his figure and he was merely using the number to illustrate that liquidity requirements were fluid and not that he had particular faith in that number. Today in Athens, EU and IMF officials will begin discussions on the bailout plan activation. Given the recent upward surge in yields and Bank of Greece Governor George Provopoulos support of a rescue, we believe in the next 10 days the EU / IMF safety net will be activated. EURUSD has been under significant pressure and with most of the negative news already priced in, a bailout should give the EUR a boost short term. The big news yesterday (outside corporate earnings) was the considerably more hawkish Bank of Canada's accompanying statement. The BoC held rates steady but dropped its conditional commitment to stay neutral until July, and added that conditions were right to remove monetary stimulus. We had believed a few central banks including the BoC (RBNZ and Riksbank) had fallen behind the curve and are now expecting their catch up to give the underlying currencies a lift.
Today's Key Issues (time in GMT):
00:00 EUR EU-IMF delegation in Athens, meetings could last 2-3 weeks.
08:30 GBP BoE MPC April 7-8 meeting minutes.
08:30 GBP Mar claimant count, -10k eyed; last -32.3k.
08:30 GBP Feb ILO unemployment, 7.8% eyed; last 7.8%.
08:30 GBP Feb avge weekly earnings, +2.5% eyed; last +0.9%.
12:30 CAD Wholesale Trade Feb +0.7% exp , prev +3.0%
23:50 JPY Trade surplus, bn yen
The Risk Today:
EurUsd EURUSD just can't seem to get a break lately, as even the slightest glint of bullish momentum is soon quashed by fresh concerns that a potential bailout of Greece might not be workable, or that it may drag the rest of its Eurozone counterparts down into the mire with it. Looking at the technical picture, the situation is very similar to GBPUSD in recent days; whereby the sell-off has punctured a relatively nascent uptrend, but thus far, not given us a conclusive break lower. In fact, the rebound off 1.3399 lows has been rather impressive all things considered (back above 1.3440), and looking at the daily chart we can still see a robust uptrend in the 14-day RSI which suggests the bears simply do not have the gumption to push this one much lower right now. For the time being, long punts should be attempted only with very tight stops -the next level below is at 1.3385 and is really the last area of bids before the former downtrend at 1.3330. The major support at 1.3268 (last seen 25 March) is likely to hold on a first visit but once back inside the old downtrend we would have to concede that this bullish break-out is over. Resistance levels on the topside will be 1.3450 which has acted as a minor pivot level in past days, then yesterday's highs of 1.3523. Above 1.3523 we like the pair higher, and look for an imminent re-visit of 1.3590.
GbpUsd Another higher than expected UK CPI figure yesterday gave GBPUSD a supercharged shot of adrenaline; ramping the pair up to highs of 1.5433 -and quickly vanquishing the doubts over Monday's breach of the 1 month uptrend. We now feel more comfortable attempting long entry on dips towards 1.5300; expecting first buying interest at 1.5320 and uptrend support now at 1.5285. Today's data calendar is almost exclusively UK oriented, but it is unlikely we get any new information from the BoE minutes, and only a significant deviation from ILO unemployment expectations is likely to budge this pair away from technical drivers. As long as uptrend support holds, we fully expect another visit to 1.5525 (15 April high) in due course, and only really a break below 1.5285 would force us to consider the prospect of another move lower. Next supports below the uptrend are seen at 1.5254 (50-day moving average), 1.5190 (19 April low), then 1.5130 (6 April low).
UsdJpy USDJPY has looked scintillating this week, having rallied nearly 2% off the lows of 91.60 and twice nudged highs of 93.40. Not only has this move broken a 2-3 week downtrend channel, but we have also seen a re-test of the back side of that channel repel further sell-off -a development we see as bullish for even further upside in the coming days. We do have to be wary of any moves back down below 92.95 -which could potentially mean an ultra short-term double-top pattern (with target below at 92.50) -but we feel there is decent support to be expected between here and 92.50 which should prevent an all-out capitulation; the first of this levels comes in at 92.90 (back side of the 2-3 week downtrend today), then 92.85 major pivot level. On the topside, the next real resistance level is 93.77, but given our strongly bullish bias we would be happy holding on to longs and waiting for a re-test of 94.79 (4 April high). Any break above 95.00 opens up a lot of targets in the region of 97.00, and beyond. Hold tight!
UsdChf USDCHF is still a range-bound pair for now between 1.0434 - 1.0810; but recent price action may have provided some evidence that the range is narrowing into a symmetrical triangle on the hourly chart. Next resistance levels above come in at the upper edge of the triangle and yesterday's highs of 1.0710, then 1.0750 (25 March highs), and 1.0810 levels last seen at the beginning of March. First support expected at yesterday's lows around 1.0600, then the lower edge of the triangle at 1.0540 before last week's lows of 1.0500. Our medium term bias remains neutral until we see price developments take a more directional turn.
Resistance and Support:
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot