EURUSD Price Action Analysis - ranging between Fibo levels for bearish to be continuing

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.07.05 08:01

EUR/USD Forecast July 6-10 – Another Greek climate (based on forexcrunch article)

EUR/USD had a wild week, moving on the deterioration of the crisis, but not always in the most straightforward manner. The new week begins with the Greek referendum and continues with data from Germany and France. Greece will certainly remains in the headlines throughout the week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Greek summary: the announcement of the referendum was followed by the Eurogroup rejecting a short term extension, the ECB capping assistance to Greek banks and triggering capital controls. This escalation resulted in a Sunday gap for the euro, but it found ways to recover and even rally. We then had ongoing negotiations, the eventual default of Greece to the IMF, more offers as both sides stopped talking and awaited the Greferendum, the IMF came out suggesting debt restructuring. For the latest, see: Greek crisis – all the updates in one place

In other news, euro-zone inflation slowed to 0.2% as expected and PMIs also came out within expectations. The US gained 223K jobs in June, slightly below expectations but revisions were negative and the bigger disappointment came from wages. Nevertheless, the Fed seems to be on track for a hike in September, but Greece is having a growing impact also on Yellen.

1. Greek referendum: Sunday. Exit polls expected in the European afternoon, well before markets open, with full results later on. The referendum, now dubbed #Greferendum, has been announced by Greek PM Alexis Tsipras on June 26th and is on the creditors’ proposal that was described by Greece as “take it or leave it”. The Greek government rejected it and calls for a vote against it. It is unclear if this proposal is still on the table. Some European leaders have described it as a vote on euro-zone membership. What’s clear is that it is a vote on the current government’s future. A Yes vote, which is more likely due to the deteriorating situation in Greece, will likely result in a relief rally, as it opens the door to a new government that will accept whatever it’s told. A No vote complicates the situation and could result in a big fall for the euro. The referendum is one climax, but the Greek crisis is set to accompany us throughout the week. Polls look too close to call.
2. German Factory Orders: Monday, 6:00. Europe’s powerhouse has seen a rise of 1.4% in April, better than expected. Despite usually being a volatile figure, this indicator has an impact. No change is expected now.
3. Retail PMI: Monday, 8:10. Markit’s measure for the retail sector finally edged up to the growth zone. It topped 50 points in May and hit 51.4 points. A similar number is on the cards for May.
4. Sentix Investor Confidence: Monday, 8:30. This survey of 2000 analysts and investors fell for the second time in June and fell to 17.1 points, below expectation. Nevertheless, it remained in positive territory, reflecting optimism. A score of 15.6 points is on the cards now.
5. German Industrial Production: Tuesday, 6:00. As with factory orders, also industrial output was good in April, advancing 0.9% and enjoying an upwards revision. A smaller change is on the cards now: +0.1%.
6. French Trade Balance: Tuesday, 6:45. The continent’s second largest economy has seen its trade deficits shrinking from the highs. In April, it reached a level of 3 billion euros, the lowest since 2009. A similar number is on the cards now: a deficit of 3.3 billion.
7. German Trade Balance: Thursday, 6:00. Contrary to France, Germany enjoys surpluses in the euro era. This surplus reached 22.3 billion euros in April, higher than expected and the highest so far this year. For May, a surplus of 20.6 billion is expected.
8. French Industrial Production: Friday, 6:45. In the past two months, France reported a contraction in the most recent industrial output data, but these were countered by positive revisions. For April, production fell by 0.9%. A bounce back is on the cards now: +0.5%.

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.07.05 14:52

Weekly outlook by Morgan Stanley for USD, EUR, JPY, GBP, CHF (based on efxnews article)

USD: Neutral
"We see scope for USD to remain supported against most currencies in G10. Data over the past week has been strong, most notably consumer confidence. At the same time, the market has pushed back the timing of the first Fed hike due to uncertainty in Greece. We see scope for this to come forward on the back of a resolution in Greece in either direction, offering support to USD."

EUR: Bearish
"We believe there is little scope for EUR to rally, regardless of the outcome in Greece. A ‘No’ vote in the referendum is likely to lead to Greece exit from the euro over time. The ECB may well have to undertake aggressive action to stabilize markets, and the enhanced liquidity is likely to weigh on the currency. On the other hand, a ‘Yes’ vote without a credible plan for the future, but rather a ‘muddle through’ solution is likely to keep uncertainty high and reduce appetite for eurozone assets."

JPY: Bullish
"In an environment of soft risk appetite, we think that JPY is likely to be an outperformer. Higher volatility is likely to drive some repatriation flows as well, and we note that portfolio flows have turned more positive. JPY is the most overvalued G10 currency on a PPP basis, supporting our view that there is scope for strength. Stronger data mean the policy tone is changing, and we expect the currency to remain supported."

GBP: Neutral
"GBPUSD has weakened from Greek risks and weaker-than-expected manufacturing PMI; however, we still see strength in the more important services sector. In particular wages here appear to be picking up which has supported rate expectations in the UK and therefore GBP. We believe there is potential for GBPUSD to reach 1.60 but prefer buying on the crosses, in particular against the NOK where an accommodative central bank highlights the divergences between the two currencies."

CHF: Bearish
"The SNB announced that it intervened following the Greek referendum announcement. This suggests to us that the SNB is less worried about the level of EURCHF and intervened more on the anticipation of rapid CHF strength. While Greek risks remain, the rapid falls in EURCHF are likely to be limited. We wait for opportunities to buy USDCHF as longer term we will start to see the negative economic impact of the stronger currency."

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.07.06 13:40

UBS: Trade Ideas for EURUSD, GBPUSD and AUDUSD (based on efxnews article)

EURUSD: "it has had a muted reaction despite the surprise outcome from the Greece referendum. Even though the market is positioned short, we expect the pair to test the downside sooner rather than later this week. Keep it tight but prefer short and add on more spikes above 1.1055 with stops above 1.1125."

GBPUSD: "Cable should remain vulnerable to Greek updates. Cable could continue holding the recent downtrend with the double top just ahead of 1.6000 while approaching the 200-day moving average at 1.5447. Stay flexible and keep stops extremely tight, but prefer selling."

AUDUSD: "The reaction to the Greek 'No' vote has been muted so far but risk should trade soft given the likelihood of further escalation of the crisis. Sell rallies to 0.7500-0.7550 with stops through 0.7610."

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.07.06 18:18

EURUSD moves back toward trend line and MA resistance (based on forexlive article)

'The EURUSD was able to move back above the 100 day MA at the 1.10379 level and we are now seeing a further move higher in the pair. Earlier today, the price extended to the 100 hour MA (blue line in the chart below) and a topside trend line (see blue circles) and held. The price is looking toward that same combination. This time it is a bit lower at the 1.1088.'

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2015.07.07 08:04

Deutsche Bank - What Risk Resilience Implies For Grexit & The EUR (based on efxnews article)

1. "Opinion is divided between the following two trains of thought: i) that the market is still optimistic that a negotiated settlement can be reached and Grexit averted. Or, ii) Grexit is no longer seen as particularly disruptive for global markets, at least in the short-term. Importantly i) and ii) are deeply inter-connected."
   
2. "The most important aspect of the latest risk resilience is that it has dramatically weakened Greece’s negotiating power. Market resilience adds to the prospects of either Grexit, or Greece agreeing to terms that are not that different from what was on offer prior to the referendum, which may not be credible as a long-term solution."
3. "So where does this leave the EUR? The worst case scenario, we have been staring at, notably Grexit, has not hurt the EUR much for now, while the best case scenarios (a negotiated settlement) are not a great reason to buy the EUR either, not least because it will be tough to reach a deal that has long-term credibility," DB adds.
4. "One implication is that there is definitely a case to be made to sell short-dated (1m or 2m) realized EUR/USD volatility, especially versus implied vols that will remain pumped up by uncertainty. We still like EUR/USD digital risk reversal trades, where selling 3m 1.14 strikes can finance a 3m 1.08 put at close to zero cost, and the timeline potentially covers a Grexit, or a September Fed tightening."