Daily Report: Euro Firm With Focus on Greece, FOMC Minutes
Euro maintains yesterday's gain against dollar and yen as markets are awaiting Greek prime minister Samaras' meeting with Luxembourg prime minister Juncker. Samaras, who's expected to propose a two-year extension for the country's fiscal adjustment program, urged European leaders to give it "breathing space" to revive the economy quickly and raise state income. He emphasized that Greece demands "no additional money" and will stand by their "commitments". But Samaras also noted that the country needs to "kick-start growth in order to cut our deficit". On the other hand, Samaras will also need to persuade Juncker, as well as German Merkel and French Hollande later in the week, Greece's commitment and thus approve the release of EUR 31.5b of funds next month to avoid a default. Merkel and Hollande will also meet to "discuss flexibility in return for assurances and the two want to have a common line before the arrival of the Greek prime minister" according to a German spokesman.
Another focus today will be the FOMC minutes. Comments from Atlanta Fed's President Dennis Lockhart tamed QE3 expectations. He said that "there is a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved only by fiscal reforms that involve making tough choices about the allocation of public resources". He also stated that it's appropriate to keep interest rates at exceptionally low levels through late 2014. Fed Chairman Bernanke will speak in the traditionally important Jackson Hole symposium at the end of the month and it's increasing likely that nothing special would be announced there. The FOMC minutes to be released today should affirm this fading expectation.
On the data front, Japan's trade deficit widened slightly to -0.33T in July with exports dropped -1.1%mom, or -8.1% yoy while imports dropped -0.9% mom and rose 2.1% yoy. Note that exports has dropped on a monthly basis for the third consecutive months while imports dropped for the second consecutive months. Australia Westpac leading indicator rose 0.5% in June. Other data to be released include Canadian retail sales and US existing home sales.
Technically, one important development to note is that while S&P 500 breached 1422.38 resistance and made new 2012 high at 1426.68 overnight, tremendous selling pressure was seen from there while pushed index to close -5 pts lower at 1413.17. We'd maintain our view that S&P 500 should be close to reversal. 1400 psychological will be watched close for the rest of the week. Break will likely trigger some more selloff in the already weak Aussie, a recovery in USD/CAD and some pull back in yen crosses.
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CurrencyMan:
I have been asked to add my comments to explain what I gather from the reports that I post. I will start with my comments and observations.
What I gather from this report is that everyone is awaiting news.
Technical traders or price action traders at the moment cannot with any real assurance tell themselves where EUR/USD will be at NOON today.
For myself I have NO BIAS as it will go where it will go and I will make money once I enter a trade based on my Trade Plan.
I ask myself first of all do we have Risk On or Risk Off for the moment ?
The answer is clear for the moment with the Dow Futures down 19 now and Europe Equities down along with Crude Oil.
Can that change ? Of course it can and it can in seconds by more SPIN and then the lemmings all JUMP over the cliff.
Not Trading is a TRADE PLAN.
If you do not know than either stay in cash or put a STOP LOSS on your open positions.
To trade without a STOP LOSS is not wise. I have traded without a STOP LOSS and it usually costs me money. I used to have a Mental Stop Loss of 100 PIPS and then later on, I had an actual STOP LOSS of 100 PIPS.
With my style of trading which is scaling in positions I have a NON NEGOTIABLE STOP LOSS of 50 PIPS.
It is all about conserving your capital to be able to trade another day.
THE MARKET IS ALWAYS RIGHT SHORT TERM.
Gold is in positive territory and that is important to note.
ONE FUNDAMENTAL FACT IN ALL OUR FACES is MONEY FLOW.
That is MONEY FLOW not "Honey Flow" !!!
If the Dow goes down 200 Points or more then MONEY FLOW will most likely bring down EUR/USD as well and BRING UP USD/JPY.
By Up, I mean it will head back towards 78.00 as MONEY from the FLOW is parked there.
As the US Bond Yields go down as US Bonds are bought US Dollars are needed to buy the US Bonds and other Asset Classes are sold.
The Yield on the 2 Year US Bonds is now .29% and the 10 Year is 1.79% with the spread 150 Basis Points.
Are there any questions ?
If so please post them here and have a great trading day.
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