EUR/USD Forecast June 29 – July 3 (based on forexcrunch article)
EURUSD was watching Greece very carefully with contrasting news causing confusion. The story became more dramatic after markets closed with the announcement of post-deadline referendum. In the last and busy week of H2, we have important inflation numbers and PMIs. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The reported breakthrough in the Greek crisis on Monday did not last long as the skies darkened on Wednesday and Thursday. New hopes for a deal on Friday still lacked a few key factors. The euro has been reacting to the headlines, but often falling on good news. One reason is the refocusing on monetary policy divergence, that favors the dollar, and the other is that the common currency has become a funding or even a “safe haven” currency. But, in case of a “Grexit” or a “Grexident”, it is clear that the euro would plunge that is already worrying some brokers. The most recent development was the announcement of a referendum on the rejected proposals. This is planned for after the deadline, assuming that the Eurogroup approves a temporary extension of the deadline, which seems unlikely as of Saturday at noon. And, the referendum law still has to pass in the Greek parliament. The crisis has overshadowed data, which has been balanced: better than expected PMIs but a weak IFO read. In the US, figures have been more positive than negative, with home sales leading the way ahead of a busy but short week in the US.
Crédit Agricole for US Week Ahead and What We’re Watching: NFP, EUR, USD, JPY & Greece Outcomes (based on efxnews article)
USD. Next week’s labour data should keep Fed rate expectations supported to the benefit of the greenback.
EUR. Regardless of any positive
developments, related to Greece, we expect the EUR to remain subject to
downside risk. This is due to the ECB’s aggressive policy stance.
JPY. Tankan unlikely to lift investor spirits. In keeping with the more cautious BoJ message expressed in recent weeks, key Japanese indicators this week should remain soft.
Morgan Stanley - EUR, JPY, GBP, AUD, CAD: Outlooks For The Coming Week (based on efxnews article)
"EUR: Markets Still Waiting for Greece. Bearish.
We remain bearish EUR over the medium term but believe that short term
trading will be dominated by market risk appetite. Should European
equities sell off as concerns about Greece rise, European investors
would need to buy back their short EUR currency hedges, supporting the
currency. That said, Greece remains a major risk and tensions are
escalating, which could drive markets to increase the risk premia in the
price of EUR, weighing on the currency.
JPY: Flows Keep JPY Supported. Bullish.
We believe JPY is likely to be one of the outperformers over the coming
months and treat it like our quasi-dollar. Flow data suggests that
Japanese investors continue to be net sellers of foreign bonds, driven
by the higher volatility and thus this prevents the JPY weakening
further. The key risk over the coming weeks is market’s risk appetite. A
deterioration from negative news from Greece could be a further support
for the JPY. We like medium term EURJPY short positions.
GBP: Strong Wages Keep GBP Supported. Neutral.
GBPUSD is being mainly driven by rate expectations and should the
recent strong wage data be sustained then this should bring forward rate
expectations. This week the BoE’s Weale suggested that he could vote
for a rate hike as early as August. 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.
CAD: Trades with Oil. Bearish.
We believe CAD is likely to weaken over the medium term in line with
other commodity currencies and still observe a strong correlation with
oil. The upcoming CPI print will be important, given prices have been on
a down trend, and we believe the Bank of Canada could generally be too
optimistic. Markets are pricing in little chance of a cut, and should
this increase, it could weaken CAD in an environment of broader USD
AUD: External and Domestic Pressures. Bearish.
We expect the AUDUSD uptrend to remain limited and would sell on
rebounds. The outlook on the economy remains weak and now that iron ore
prices are expected to weaken over the coming months from increased
supply, there could be a renewed story to support the next leg lower in
the AUD. Indeed, the RBA needs to remain dovish for our near term story
to hold so it is a risk if the governor sounds less dovish than markets
have come to rely on. 0.76 is a key support level."
COT report by Scotiabank: Takeaways On USD, EUR, AUD, & Other Majors (based on efxnews article)
EUR sentiment deteriorated for the first week in four,
the net short widening $1.3bn to $13.9bn. Its w/w shift was the result
of a paring back in both long and short positions, highlighting a
broader trend of withdrawal in traders’ participation as a result of
elevated uncertainty and the binary nature of Greek risk.
Investors pared back JPY risk in a manner similar to that observed in EUR,
albeit to a greater degree with a $2.7bn decline in gross longs and
$2.0bn decline in gross shorts. The pattern suggests that traders await a
greater degree of certainty in the face of binary Greek risk.
CAD sentiment has deteriorated for the third week in four,
the net short widening $0.4bn to $1.4bn on the back of a decline in
gross longs—falling to their lowest levels since June 2013. AUD sentiment is also bearish, albeit modestly so
with a net short at $0.7bn. Investors in appear cautious in adding to
risk in either CAD or AUD, waiting for a breakout of their relatively
Forex technical analysis: EURUSD gaps. What is the trading strategy? (based on forexlive article)
'Looking at the daily chart below, the price has been able to extend
below the 50% of the move up from the March low at 1.04617 to the high
from May at 1.14658. That level comes in at 1.09638. This remains a key
level to get below - and satay below if the bears are to extend the
Credit Agricole - 'A Referendum On EUR': What's Next For Greece? (based on efxnews article)
"The upcoming referendum is in fact a referendum on the Greek membership in the Eurozone.
Indeed, if the people of Greece turn down the reform proposal, the
country will end up with no creditor funding (and no ECB support for its
banks). A default should follow and, with Greece still cut off from the
global capital markets and with no sovereign default resolution
mechanism in place in the Eurozone, the government will be forced to
raid domestic deposits or issue IOUs. The latter will be in violation of
the EZ treaties and mean Greece should ultimately leave the EUR.""Needless to say, social tensions should escalate and political uncertainty soar, pushing the economy closer to the precipice.""Given
the gravity of the decision, we still think the people of Greece will
choose to stay in the EUR and agree to the creditors' reform proposal on
Danske Bank 'Buy SEK, NOK, CHF And Sell NZD, USD, CAD for this week' (based on efxnews article)
Bank of America Merrill Lynch for EURUSD: Monetary Policies Vs Greece (based on efxnews article)
FED, ECB, Greece:
"The Greek Referendum will drive headlines for the near-term. We
believe that divergence of monetary policies is a more powerful EUR
driver than Greek risks. In this context, the timing of the first Fed
rate hike (September is our call) and the ECB’s tone (the market misread
the ECB’s message to get used to volatility) are more important for the
euro than Greek headlines. Whilst Greek headlines and deadlines
are clearly urgent, and the market implications in our view both
important and not priced in the short-run, ultimately the evolution of
monetary policy is in our mind more important," BofA argues.
"We remain bearish EUR/USD, but the uncertainty around the Fed
is not bolstering our conviction levels. The euro’s reaction to Greek
headlines has been puzzling, sometimes weakening in response to
positive headlines for a deal. In part, this is because the USD is
oversold. It can also be that the market does not believe that a deal
will fully address Grexit risks, which in turn suggests that the ECB is
likely to keep QE to be able to address periphery risks and push against
a rates sell-off. This could explain the negative correlation between
European equities and the Euro recently. Our view remains that tail risks in Greece are negative for the Euro," BofA adds.
"We have marked-to market our Q3 EUR/USD projection, but keep our end-year projection to 1.00.
This assumes that US data will improve in H2, the Fed will start hiking
rates in September, the ECB will push against the recent sell-off in
rates, inflation will remain below the ECB’s target path, and the market
will start expecting the ECB to continue with QE after September 2016,"
"At the same time, we expect the Fed to push against any strengthening of the USD that goes beyond what data would justify. We
do not expect Grexit in our baseline, but believe that Greek risks will
continue weighing on the Euro, with Grexit risks increasing as long as
Greece remains in a grey zone," BofA adds.
Trading the News: U.K. Gross Domestic Product (GDP) (based on dailyfx article)
An upward revision in the U.K. 1Q Gross Domestic Product (GDP) report
may heighten the appeal of the British Pound and spur a near-term
advance in GBP/USD as it puts increased pressure on the Bank of England
(BoE) to normalize monetary policy sooner rather than later.
Why Is This Event Important:
Signs of a stronger recovery may spur a growing dissent within the
Monetary Policy Committee (MPC) as board member Martin Weale sees scope
to raise the benchmark interest rate as early as August, and we may see a
growing number of BoE officials adopt a hawkish tone over the coming
months should the fundamental developments coming out of the U.K. boost
the outlook for growth and inflation.
However, the slowdown in building activity along with the softening in
private-sector credit may lead to a lackluster GDP print, and fears of a
slower recovery may drag on the British Pound as it gives the central
bank greater scope to retain its wait-and-see approach throughout 2015.
How To Trade This Event Risk
Bullish GBP Trade: U.K. Economy Expands Annualized 2.5% or Greater
MetaTrader Trading Platform Screenshots
GBPUSD, M5, 2015.06.30
MetaQuotes Software Corp., MetaTrader 5
GBPUSD M5: 28 pips price movement by GBP - GDP news event
Euro area annual inflation down to 0.2% (based on official report)
Euro area annual inflation is expected to be 0.2% in June 2015, down
from 0.3% in May 2015, according to a flash estimate from Eurostat, the
statistical office of the European Union.
EURUSD M5: 35 pips price movement by EUR - CPI Flash Estimate news event: