EUR/USD flat, as Greece prepares for Monday showdown with creditors
The euro fell mildly against the dollar on Friday, as the two sides in longstanding Greek Debt negotiations began preparation for Monday's emergency summit of leaders from the European Union.
EUR/USD ticked down 0.0010 or 0.09% to 1.1353, snapping a two-session winning streak. The currency pair still ended the week up by more than 1% after surging to a monthly high of 1.1438 one session earlier.
EUR/USD likely gained support at 1.1188 the low from June 15 and was met with resistance at 1.1450, the high from May 18.
One day after high-level talks in Luxembourg broke-off without a deal in the five-month long Greek debt negotiations, the European Central Bank reportedly increased the cap on its Emergency Liquidity Assistance fund for banks in Greece by €3.3 billion. It came days after depositors took out a reported €2.0 billion from Greek banks in a 72-hour period, underscoring their lack of trust in the teetering economy.
Greece is running out of time before it owes the International Monetary Fund a bundled loan payment of EUR 1.5 billion on June 30. At the same time, the remaining €7.2 billion of a €240 billion stimulus package from its international creditors is set to expire at the month.
On Monday, all 27 members of the European Union are scheduled to be present at an emergency summit in what could be Greece's final opportunity to avoid a default. During an appearance in St. Petersburg, Greece prime minister Alexis Tsipras indicated that he will be "working for success" at Monday's summit, while adding that "those who invest in crisis and terror scenarios will be proven wrong."
Meanwhile, a spokesperson for Germany chancellor Angela Merkel said it isn't too late for Greece to complete a deal as long as it agrees to the reforms required.
Elsewhere, Federal Reserve Bank of San Francisco president John Williams reiterated on Friday that an interest rate hike could be appropriate in 2015, while adding that waiting too long for lift-off poses added risk. The remarks were the first public comments by a Fed governor since the Federal Open Market Committee opted not to issue any definitive wording on the timing of a rate hike on Wednesday.
EUR/USD: Dollar Bulls Lashed for 3rd Wk as Yellen & Co Muddy Waters
The dollar edged lower against the euro last week, booking its third straight weekly loss as tame US inflation and a cautious message from the Federal Reserve (Fed) drove uncertainty over when rates will start to rise. However, the resilience of the common currency was more a reflection of the greenback's softness rather than demand for the euro, given Greece's future in the euro zone was hanging in the balance.
The dollar gave up 0.80% over the past seven days and ended Friday at $1.1348 versus the common European currency. Exactly a week ago it was seen at $1.1258.
Still, it was roughly 16.8% up on a year-to-date basis.
The EUR/USD pair booked its weekly low of $1.189 on Monday and a monthly high of $1.1436 on Thursday, moving above the $1.14 mark for the first time since May 18.
As for the daily performance, the dollar lost 0.46% on Monday, just to gain 0.31% on Tuesday. Wednesday and Thursday saw the sell off return and the greenback trashed 1.09% and 0.09%, respectively. Back then, it got hurt by the Federal Open Market Committee (FOMC) statement and the following presser from Chair Janet Yellen, which were both viewed as surprisingly dovish by market watchers. However, on Friday it rose 0.09% as traders, facing an empty macro calendar, looked more closely at the seemingly never-ending Greek drama.
Dollar bulls see red
The biggest move on the pair happened on Wednesday, when the US central bank concluded its two-day monetary policy meeting with a rather unsatisfactory result for dollar bulls. Market watchers interpreted the statement - followed by Yellen's presser - as a dovish signal, given the overall lack of clarity from the Fed. (Read more here)
The policymakers also offered a darker view on the US economy, as they markedly trimmed this year's growth outlook. Real GDP for 2015 was lowered to +1.8%-2.0% from the March projection of +2.3%-2.7%.
The bank also revised down its interest rate projections for 2016 and 2017 by 25 basis points.
With Yellen & Co again successfully muddying the timing of the first rate hike, those investors, who had been expecting a stronger commitment for a September liftoff, were forced to unwind their dollar long positions.
This tone was even underlined the day after as Thursday's CPI print of core inflation revealed a mere 0.1% uptick in May, the smallest gain in five months. This confirmed bets the Fed can stick to a very gradual policy tightening cycle, when it eventually does start hiking rates later in the year.
Nevertheless, jobs data pointed to an ongoing resilience in the world's largest economy. Thursday's initial jobless claims surprised on the upside and showed the smallest increase of newly unemployed in 15 years. (Read more here)
Meanwhile, the euro part of the pair continued to be under influence of the seemingly never-ending Greek never-rattling.
Yet again, the week didn't bring a much-hoped breakthrough in the debt talks, despite both sides - Athens and its foreign creditors - expressing their will to strike a deal that would unlock critical aid deemed necessary to stave off bankruptcy.
Thursday's tense meeting of euro zone finance ministers in Luxembourg ended without any result, exacerbating worries that the cash-strapped country will eventually fall off the default cliff. Things got even more serious after Reuters reported that European Central Bank (ECB) Executive Board member Benoit Coeure told Netherlands Finance Minister Jeroen Dijsselbloem that he is unsure if banks in Greece will remain open on Monday.
International Monetary Fund (IMF) head Christine Lagarde warned that Greece will not be given a grace period if it fails to make a loan repayment of €1.5 billion on June 30. (Read more here)
What to expect?
Thus, the drama is set to continue even next week, with another emergency meeting scheduled for Monday evening.
"Amid reports of deposit flight from Greek banks, expect markets to remain inherently nervous towards the euro," Emmanuel Ng of OCBC Bank wrote in a note on Friday. "In the interim and despite dovish overtones from the ECB’s monthly bulletin, the $1.1400 ceiling is deemed to be at risk in the current dollar environment while $1.1345 may offer initial support on dips before $1.1300," he offered his view.
The Bank of Tokyo-Mitsubishi, meanwhile, thinks that the current subdued tone in the dollar will persist even during the upcoming week. "The euro is likely to remain within a consolidation phase against the US dollar in the week ahead," a note from the bank said, adding that the greenback is likely to struggle to regain upward momentum in the near-term after the Fed signaled more caution about raising rates.
Still, the US currency will move higher in the more distant future, the bank claimed. "We continue to believe that the next likely move for the US dollar will be higher after the current period of consolidation ends."
EUR/USD Forecast June 22-26
EUR/USD had a tense week around the Greek crisis and the dovish message from the Fed. Can the rally continue? Flash PMIs and another German survey stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The Greek crisis got closer to the edge in a week that saw heightened rhetoric across the old continent. Germany’s ZEW indicator disappointed once again and Draghi left the stage to Greece and to his colleagues across the pond. In the US, economic data was mixed but the focus was naturally on the Fed, that was clearly dovish. With a lower dot plot, a slower pace of projected rate hike and a lack of confidence that the recovery is sustainable, the dollar tumbled down and EUR/USD breached the double top. A deterioration in the Greek crisis, which is into an emergency phase, sent the pair back down.
Greek finance minister: "We're heading for a deal"
Could be fireworks at the open for the euro
Here's how Reuters reports the exchange with finance minister Varoufakis after he left 8 hours of meetings.
"Asked by reporters if he was confident of reaching an agreement, Varoufakis said: 'Always, we're heading towards a deal.' He gave no details"
Separately, Bloomberg cites an EU diplomat said that creditors still await Greece's proposal.
If you could get in early, there's a case to be made for buying the euro. That said, there's always the fear of 'selling the fact' on Greece but my suspicions are that a rally will last at least until a deal is semi-official.
So far it is buy, buy, buy all the way up - and then there will be a sharp reversal, but not yet
EUR/USD: Euro Touches $1.14 on Greek Hopes
The euro was seen in touch with the $1.14 handle on Monday as the US dollar came under pressure on Greek hopes.
Two crucial meetings are scheduled for Monday. This afternoon will see the Eurogroup convene (euro zone finance ministers), while heads of states or governments will gather on Monday night, including German Chancellor Angela Merkel, French President François Hollande and Greece's Prime Minister Alexis Tsipras.
Tsipras will also meet the top representatives of Greece's international creditors - the European Commission, European Central Bank and International Monetary Fund - on Monday ahead of an emergency summit.
The euro rose 0.43% to $1.1393 ahead of the European open. The US dollar index, measuring the relative strength of the greenback against a basket of six major currencies, declined 0.24% to 93.855.
Reports say Greece has made a new offer to its creditors, but as with every previous instance of such reports of this nature, submitting proposals is one thing, having them accepted by the creditors is another and even then they then have to be ratified by the Greek parliament.
The persisting uncertainty over the final outcome of the Greek talks advantages safe-haven currencies such as Japanese yen, but hits European stock markets. Over the past four weeks, European equities look set to post their worst run of monthly losses in over three years, as the concerns over an uncertain outcome continue to build.
On Friday session the EURUSD initially rose but found enough resistance near the 1.1391 to give all its gains back and closed in the red near the open of the day. The currency has some support in the 10-day moving average that is pushing the price up while the Greek drama continues. Key levels to watch today the 1.1391 Resistance and the 1.1300 10-day moving average support.
Three or four events scheduled for today, exciting!
EUR/USD: Euro Wakes Up, Targets $1.14 on Greek Optimism
The euro shifted higher after US markets opened on Monday, rebounding toward the $1.14 handle touched earlier in the day.
The euro inched up 0.22% to $1.1371 against the US dollar, rising toward its intraday high of $1.1403 and rebounding from lows at $1.1311.
"Despite the crisis in Greece the euro remains near multi-week highs against the dollar. Some have suggested that the euro has actually benefited from the uncertainty, due to the unwinding of short positions linked to 'carry trades'. But this rather convoluted explanation does not stack up. Instead, our interpretation is that the markets have become less concerned about the risks posed by 'Grexit', which has allowed the euro to be supported by a more straightforward shift in yield differentials," analysts at Capital Economics wrote in a note on Monday.
Reports say Greece has made a new offer to its creditors, but as with every previous instance of reports of this nature, submitting proposals is one thing, having them accepted by creditors is another, and even then they must still be ratified by the Greek parliament.
The last, but still not the final meeting held in Brussels today, saw most probably the final proposal of the Greek government, which could help unlock the $7.2 of additional bailout funds, which are crucial for Greece to avoid default.
In the US, the reports on May durable goods and the third estimate of the first-quarter US GDP growth will be in sharp focus on Tuesday and Wednesday.
"While economic growth concerns have been relegated to the back burner amid Greek negotiations, this week’s likely firmer economic data should help improve the market’s conviction in a September rate hike. Last week’s FOMC meeting was viewed by markets as relatively dovish, though we believe that the key takeaway for near-term market price action was that the bar to the first rate hike may be set lower than many had expected," Gennadiy Goldberg from TD Securities said on Monday.
Last week, the Federal Open Market Committee meeting failed to provide support for the US dollar, when it downgraded its GDP and unemployment outlook and made dovish changes in the so-called dot chart, indicating that rate hikes might be slower than previously anticipated.
EUR/USD continued its bullish momentum last week, topped at 1.1436. Expectations remain upwards in the short term, but long term I prefer a bearish scenario at this phase and the area 1.1380 - 1.1465 remains a good place for short positions with targets in the area of 1.1180 - 1.1050 with tight stop loss above 1.1465. Immediate support is seen at 1.1325. A clear break below that area could lead price to neutral zone testing 1.1280 / 50.