FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Asian equities and risk assets are trading higher as an improved risk environment continues from yesterday. EURUSD broke above the 1.45 mark, building on its gains following yesterday’s Greek austerity vote, while the dollar was soft across the board. The news wires were quiet and markets continue to trade on wider risk appetite. EURUSD traded 1.4519-1.4416, USDJPY 80.93-80.31. The focus remains on the Eurozone where a strong CPI estimate is likely to keep the euro supported in the short term, as interest shifts to the upcoming ECB meeting, where around an 80% chance of a hike is priced into markets. In Greece, another parliamentary vote is due, to pass legislation to enact the austerity measures. We also expect this vote to pass.
EUR
The euro continues to push higher following yesterday’s vote. Yesterday saw choppy trading conditions as the Greek parliament voted on the latest package of austerity measures. Individual votes were announced as soon as they were cast, and levels of concern rose sharply when one ruling party parliamentarian voted again the proposals. However, the vote was ultimately carried by 155 votes to 138.
Minutes later the euro fell after Germany’s economy minister declared that the vote in itself would not be enough, and that appropriate private sector involvement may be needed.
German Chancellor Merkel said the positive vote outcome is an important step for stabilising the euro. ECB Governing Council member Orphanides however warned that the debt crisis still remains in “quite dangerous territory”. ECB’s Nowotny said that a Greek default would be much more painful than the austerity drive.
Another parliamentary vote is due to be held on Thursday. The aim of the second vote is to pass the legislation needed to enact the austerity measures which have just been voted through. We also expect this vote to pass, although we acknowledge that the risk of failure has grown after Prime Minister Papandreou’s decision to expel the dissenting deputy from the parliamentary party, leaving Papandreou with an even slimmer majority of only 154/300.
EU Council President Von Rompuy, and EU Commission President Barroso declared that Thursday’s vote would pave the way for the release of Greece’s next quarterly tranche of cash.
GBP
UK GfK consumer confidence fell to -25 in June, slightly lower than consensus. The result in May was largely related to improved weather and extra bank holidays so this print is sa return to trend. The retail sector in the UK remains very subdued.
CHF
The Swiss Economy Minister Schneider-Ammann said that it is not the government’s responsibility to deal with the strong franc, and that he is confident that exporters will be able to cope with the strong currency. He warned that the franc’s strength is not a ‘temporary phenomenon’ and that the ‘strong franc will persist’.
CAD
Canadian inflation numbers for May came in much stronger than expected. This piled additional downward pressure on USDCAD at a time when the pair had already been drifting lower due to the favourable risk-on environment. Headline CPI was +3.7% y/y (cons. +3.3% y/y), while the core number also printed well above consensus at +1.8% y/y (+1.5% y/y).
TECHNICAL OUTLOOK
EURCHF 1.2147 key resistance.
EURUSD BULLISH Clearance of 1.4498 signals potential for further gains towards 1.4697. Initial support is at 1.4333.
USDJPY BEARISH As long as resistance at 82.21 is intact, expect decline towards 79.70 and 79.57. Near-term resistance is at 81.27.
GBPUSD BEARISH Break of 1.5911 would expose 1.5881 Fibonacci support. Resistance is at 1.6263.
USDCHF BEARISH Watch support at 0.8276, a break below which would leave little support till 0.8165. Initial resistance is at 0.8439.
AUDUSD BULLISH Following the recovery through 1.0726, the pair now targets 1.0775. A break here would open 1.0889. Support lies at 1.0520.
USDCAD NEUTRAL Break of 0.9671 has exposed 0.9641, while near-0term resistance is at 0.9825.
EURCHF BEARISH Key resistance is at 1.2147; while this holds, expect decline towards 1.1925 and 1.1806.
EURGBP BULLISH Rise through 0.9000 has paved the way for gains to 0.9043, the key level. Support lies at 0.8928.
EURJPY NEUTRAL The near-term directional triggers are at 117.90 and 115.13.
SCHEDULE
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