EU warns Greece not to 'play games' with IMF and BoE Super Thursday!

Good morning,

- AUD, NZD, CAD down as risk-on FX follows Asian stocks lower. Anti-risk JPY and EUR outperforming. Nikkei -4.2%, ASX -1.7%, Hang Seng -1.8%

- $EUR was the best performing major vs $USD on Wednesday with +0.17% spot-returns while $CAD was the worst performing with -0.54% returns.

- The EU's economic affairs commissioner on Wednesday called on Athens "not to play games" with the International Monetary Fund as the body decides whether to participate in Greece's latest bailout. Pierre Moscovici insisted the IMF must play a role in the three-year, 86-billion-euro ($93-billion) rescue package agreed in July, but Greek Prime Minister Alexis Tsipras has said funds from the institution are not necessary. "We don't play games with the IMF," Mr Moscovici said in an interview with the German daily Suddeutsche Zeitung. "We are going to try to come to come to an agreement with the Fund," he said. "For many (EU) member countries, not only Germany, the participation of the IMF is an absolute necessity," the former French finance minister added. Germany, which led negotiations last year and where the public are largely critical of the idea of sending more funds to Greece, has said the IMF must be involved in any bailout.The Washington-based institution teamed up with the EU on the first two bailouts for Greece, but held back from making a decision on the most recent round, citing insufficient reform pledges from the Greek authorities and European reluctance on restructuring the country's debt.

- After U.S. crude prices broke below $30 per barrel for the first time in 15 years, the market is asking how low oil futures can go? Most analysts see it rebounding in the back half of 2016, but crude faces significant headwinds in the coming months, experts told CNBC. On Monday, Morgan Stanley joined Goldman Sachs in saying oil prices could dip to $20, and a number of major banks cut their crude cost outlook this week. Standard Chartered even raised the specter of $10 oil. Oil as low as $20 — and perhaps even lower — is indeed possible, said Matt Smith, ClipperData's director of commodity research. "It seemed outlandish that we would get down to this level, but by all means, we could drop another $5-10 here," he told CNBC's "Squawk Box" on Wednesday. "Now we've tested the two-handle here and the weakness is really going to come over the next sort of three, six months as the market looks to rebalance." U.S. output in particular has weathered an OPEC policy engineered by Saudi Arabia to preserve market share and pressure higher-cost production. American drillers maintained output above 9 million barrels per day throughout 2015, according to the latest available figures from the U.S. Energy Information Administration. Global oil production has so far remained stubbornly high despite a roughly 70 percent collapse in crude prices since mid-2014.

- BOJ's Governor Kuroda: Japan's price trend is improving, will continue to watch developments in markets.

- Chinese equities lower after Thursday's opening: CSI 300 3085.77 (-2.24%), Shanghai Comp 2874.52 (-2.54%).

- $AUDUSD little changed after December's Australian employment data beat expectations.

- USD/JPY broke below major support by closing under 118.40, a level that supported the uptrend on a closing basis for over a year. Less the late-August whipsaw low of 116.18, this creates a sequence of lower highs and lower lows.

USD/JPY’s multi-year uptrend is ending. The current trend is increasingly likely to bounce, and we recommend selling strength. We see major resistance at 121.80 where the 50d is crossing below the 200d moving average. USD/JPY weekly chart shows a bearish cloud cross. One of the important bearish signals we discussed in our 13 December report, Technical Advantage: USD/JPY shows signs of weakness, was the the pending cross of the Ichimoku cloud. The cross occurred, and the cloud is officially in a bearish position. This happened with RSI breaking support and showing a bearish momentum. USDJPY may trade down to the 100wk moving average and the bottom of the rising cloud at about 114-115.50. Given the triangle top, a measured move suggests 112 is even a possibility. A rise to the 50wk average and top of the cloud at about 120.75 would be a great place to go short, in our view. EURUSD faces foreboding resistance. The amount of resistance the EURUSD has to contend with is significant. A short-term trend line, 38.2% Fibonacci retracement, Ichimoku cloud, 200d moving average and long-term trend line remain above price. The biggest cluster of resistance is between 1.0979-1.1045. The long-term trend line and 50% retracement align at about 1.1119. A decisive close into resistance could be a signal that the trend may rise, though we are doubtful.
The overall trend remains lower, and we look to support at 1.0836, 1.0640 and March lows of 1.0458.

- Federal Finance Minister Bill Morneau: Paying close attention to Canadian dollar. Dollar not something Canada Govt. can control. Repeats vow to "invest signifcantly" in Canada economy.

- One currency pair that’s poised for a potentially big move one way or another in the latter half of this month is EUR/GBP. The European pairing has been on a tear lately as traders continue to push back expectations of BOE tightening; now the market is not expecting the central bank to raise interest rates until May 2017 , a big change from the expectations a few months ago, when even the pessimists assumed the Carney and company would raise interest rates in 2016. With both the Eurozone and UK economy struggling, EUR/GBP traders will closely monitor the relative changes in major economic indicators moving forward, as well as the geopolitical risks on the horizon (cough Brexit? cough). While we can’t fault readers for trading EUR/GBP in either direction at this point (as long as they’re using stop losses and good risk management techniques), the most prudent strategy may be to wait for the pair to “pick a direction” before committing too strongly. For instance, if EUR/GBP rallies to close above Monday’s high at .7555, it would tilt the odds in favor of more strength, potentially up toward the 38.2% Fibonacci retracement of the entire 2013-15 drop near .7650, if not higher.

On the other hand, a move back below the .7420 level that marked Monday’s low would indicate that the bears are finally stepping in to defend that key resistance level and could open the door for a dip back toward the middle of the recent range around .7200 or even long-term support near .7000. Of course, tomorrow’s BOE “Super Thursday” festivities could have a meaningful impact on the pair so if the initial move following the central bank’s latest proclamations is maintained, it could set the tone for the next couple of weeks’ worth of trade in EUR/GBP.

- Major news for today: BoE Official Bank Rate, USD Unemployment Claims, Euro group Meetings.

Have a great day!