Good morning everyone.
The calm before the storm seems to be upon us this day as we creep closer and closer to the EU summit where it is anticipated that a decision will be made about Greece. From a strictly accounting perspective, Greece would be allowed to default and probably leave the EuroZone. However, there is a lot more than money at stake here. The Eurozone was a political dream where a single currency was meant to bind many disparate countries together in solidarity. The departure of a struggling economy from this monetary union will surely spell the end for the currency as we know it as it will open the door for Spain, Italy, Ireland, Portugal and Cyprus to also leave and render the Euro useless in achieving its goals of keeping the continent together. So, in the end, no matter how much verbal diarrhea is dished out about it, the Troika will more than likely extend the next aid tranche to Greece and all will be good for another 3 months until the next review.
The Eurozone have become experts at can kicking. So much so that they have managed to find new roads down which to kick these cans. The purpose of these can kicking episodes is to buy enough time for the weaker EZ nations to get their act together by fixing their fiscal problems and restructuring their economies to return to competitiveness. The problem is that they cannot do that as long as they are burdened with the shackles of a common monetary policy. The weaker nations need a much easier monetary policy to avoid deflation whilst the stronger ones need to tighten in order to combat inflation. The ECB is looking at the entire EZ as one economy and that's just a recipe for disaster. The proof of this is in the pudding. All one has to do in order to realize it is to look at where the member nations stand today. In order for a common monetary policy to work for 17 different nations, those same nations need to have a common fiscal policy. Unfortunately, whilst the majority of the nations leaders (not the people) want that, some don't, and in the Eurozone, any one country has veto power over all the others. In other words, nothing happens unless all agree.
Today's economic calendar should be an interesting one for short term risk sentiment. this morning we have the ZEW Economic Sentiment and the Consumer Price Index (CPI) for the Eurozone. Later today we get the US CPI and m/m Industrial Production figures. On top of any additional positive risk sentiment coming out of Germany's apparent willingness to go easy on Greece, a positive number for ZEW will likely propel the Euro to over the 1.30 round number into the 1.3030 to 1.3070 zone. CPI is usually a good measuring stick of possible future monetary policy changes where a sustained number higher than the CB's target (usually 2% annualized) usually compels central banks to tighten policy and a lower number would compel them to ease further if required according to other economic data such as GDP growth and employment. It's pretty much a coin toss how the CPI figures from today are going to impact any future CB decision but it may get market speculators thinking about how they want to play it.
Technically, again we have been stuck in a range between 1.3070 and 1.2800, so until I see a break of either of these two levels, the only intraday trade I see is shorts at the top and longs at the bottom (with tight stops of course). A break above 1.3070 will likely find much resistance around 1.3120 followed by 1.3170 and then the 1.3200 round figure. Below current price, next significant support comes in around 1.2950/60, 1.2890, 1.2825 and 1.2800 the figure.
As always, be well and trade safe.
Pete Jackson's Order Board:
EUR/USD: Bids 1.2940/50, some sell stops through 1.2940 ahead of sovereign bids 1.2880/00 with further sell stops below. Offers at 1.2980/00 ahead of tech res 1.3010/30 (76.4% retracement 1.3013 of 1.3072-1.2825 fall, 1.3026 early Mon high)
Today's Euro FX Option Expiries @ 14:00 GMT:
EUR/USD: 1.2900, 1.2925, 1.2950, 1.3040, 1.3045, 1.3050,
E/U H1:
E/U Weekly:
The calm before the storm seems to be upon us this day as we creep closer and closer to the EU summit where it is anticipated that a decision will be made about Greece. From a strictly accounting perspective, Greece would be allowed to default and probably leave the EuroZone. However, there is a lot more than money at stake here. The Eurozone was a political dream where a single currency was meant to bind many disparate countries together in solidarity. The departure of a struggling economy from this monetary union will surely spell the end for the currency as we know it as it will open the door for Spain, Italy, Ireland, Portugal and Cyprus to also leave and render the Euro useless in achieving its goals of keeping the continent together. So, in the end, no matter how much verbal diarrhea is dished out about it, the Troika will more than likely extend the next aid tranche to Greece and all will be good for another 3 months until the next review.
The Eurozone have become experts at can kicking. So much so that they have managed to find new roads down which to kick these cans. The purpose of these can kicking episodes is to buy enough time for the weaker EZ nations to get their act together by fixing their fiscal problems and restructuring their economies to return to competitiveness. The problem is that they cannot do that as long as they are burdened with the shackles of a common monetary policy. The weaker nations need a much easier monetary policy to avoid deflation whilst the stronger ones need to tighten in order to combat inflation. The ECB is looking at the entire EZ as one economy and that's just a recipe for disaster. The proof of this is in the pudding. All one has to do in order to realize it is to look at where the member nations stand today. In order for a common monetary policy to work for 17 different nations, those same nations need to have a common fiscal policy. Unfortunately, whilst the majority of the nations leaders (not the people) want that, some don't, and in the Eurozone, any one country has veto power over all the others. In other words, nothing happens unless all agree.
Today's economic calendar should be an interesting one for short term risk sentiment. this morning we have the ZEW Economic Sentiment and the Consumer Price Index (CPI) for the Eurozone. Later today we get the US CPI and m/m Industrial Production figures. On top of any additional positive risk sentiment coming out of Germany's apparent willingness to go easy on Greece, a positive number for ZEW will likely propel the Euro to over the 1.30 round number into the 1.3030 to 1.3070 zone. CPI is usually a good measuring stick of possible future monetary policy changes where a sustained number higher than the CB's target (usually 2% annualized) usually compels central banks to tighten policy and a lower number would compel them to ease further if required according to other economic data such as GDP growth and employment. It's pretty much a coin toss how the CPI figures from today are going to impact any future CB decision but it may get market speculators thinking about how they want to play it.
Technically, again we have been stuck in a range between 1.3070 and 1.2800, so until I see a break of either of these two levels, the only intraday trade I see is shorts at the top and longs at the bottom (with tight stops of course). A break above 1.3070 will likely find much resistance around 1.3120 followed by 1.3170 and then the 1.3200 round figure. Below current price, next significant support comes in around 1.2950/60, 1.2890, 1.2825 and 1.2800 the figure.
As always, be well and trade safe.
Pete Jackson's Order Board:
EUR/USD: Bids 1.2940/50, some sell stops through 1.2940 ahead of sovereign bids 1.2880/00 with further sell stops below. Offers at 1.2980/00 ahead of tech res 1.3010/30 (76.4% retracement 1.3013 of 1.3072-1.2825 fall, 1.3026 early Mon high)
Today's Euro FX Option Expiries @ 14:00 GMT:
EUR/USD: 1.2900, 1.2925, 1.2950, 1.3040, 1.3045, 1.3050,
E/U H1:
E/U Weekly:
Those who say it cannot be done should not interrupt those who are doing it
