Will they? Won't they?

Greece and its creditors offered different views on their negotiations. Greek PM Tsipras said that a deal was “close” and government official said an agreement was being drafted, but there was no confirmation of that from the creditors’ side. On the contrary, German Finance Minister Schaeuble said he was “surprised” by the Greek comments, which may have been made in order to quell outflows from the banks. The ECB Wednesday declined to raise the amount of Emergency Liquidity Assistance (ELA) that it supplies to the Greek banking system, despite reports that some EUR 300mn a day (= EUR 1.5bn a week) is leaving the banks. This will put more pressure on the Greek government to come to an agreement, otherwise they risk having to declare a bank holiday and capital controls, which will not boost their popularity. It does seem to me that the end of this long drama is approaching, and it seems to me that the Greek side has more to lose. I would expect that PM Tsipras will give in, but whether he can get approval from the Greek parliament for an agreement is another question. EUR-NEGATIVE.

Japan retail sales disappoint Japan’s retail sales for April rose only 0.4% mom, less than forecast. The sluggish rise signals a weak start to Q2. Demand hasn’t yet recovered completely from the hike in the consumption tax a year earlier. JPY was not materially affected by this news in particular; rather, it seems to be under pressure generally, probably due to technical factors after it broke out of its recent range. (In fact the big move in USD/JPY coincided with the announcement of the Australian capital spending figures. It may be that investors felt that as AUD/JPY plunged, the yen’s appreciation vs AUD had gone too far and started selling JPY.)

Australian investment plunges In Australia, private capital expenditure for Q1 fell twice as rapidly as expected, down 4.4% qoq instead of the expected 2.2% drop. The Reserve Bank of Australia is looking for other industries to take up the slack as mining investment falls, but apparently that hasn’t happened yet. On the contrary, mining investment was down 4.1% qoq in Q1, while manufacturing investment was down a much faster 8.5% qoq. Added to the sluggish growth in China and this makes it more likely that the RBA will have to cut rates again. Expect AUD to remain under pressure (it fell the most of any G10 currency over the last 24 hours).

Today’s highlights: During the European day, the main event will be the second estimate of the UK GDP for Q1. The forecast is for the figure to be revised up to show a +0.4% qoq pace of growth from +0.3% at the preliminary estimate, confirming modest growth momentum in early 2015. Coming on top of the recent strong data that suggest an even better growth rate in Q2, GBP could strengthen. The low unemployment rate and the higher real wages following the country’s dip into deflation in April could improve consumer spending, which could add steam to the UK’s recovery.

Eurozone economic confidence for May is expected to decline a bit, while consumer confidence is expected to be unchanged.

In Norway, the AKU unemployment rate for March is forecast to remain unchanged. The official unemployment rate remained unchanged in March, so the probability for another unchanged reading is high.

In Canada, current account deficit is forecast to widen somewhat.

In the US, we get the initial jobless claims for the week ended May 23 and pending home sales for April. Existing home sales disappointed last Thursday, therefore, we could see another disappointment from pending home sales. Nevertheless, the recent housing data was robust. In any event, pending home sales are not that big a market-mover, so the market reaction is likely to be minimal as usual.

As for the speakers, San Francisco Fed President John Williams, ECB Governing Council member Ewald Nowotny and Minneapolis Fed President Narayana Kocherlakota speak.

The Market

EUR/USD hits support slightly above 1.0800

EUR/USD continued declining on Wednesday, fell below 1.0865 (S1), but hit support slightly above 1.0800 (S2) and rebounded to end the day virtually unchanged. The short-term outlook remains negative in my view. I would now expect a break below 1.0800 (S2) to confirm a forthcoming lower low on the 4-hour chart, and perhaps pave the way for the 1.0665 (S3) zone. Nevertheless, taking a look at our momentum studies, I would be careful that further upside correction could be in the works before the bears seize control again. The RSI edged higher after exiting its oversold zone, while the MACD has bottomed and crossed above its trigger line. On the daily chart, the move below the 1.1045 (R2) barrier increases the likelihood that the 13th of April – 15th of May recovery was just a corrective move and that the prior downtrend could now be resuming.

• Support: 1.0865 (S1), 1.0800 (S2), 1.0665 (S3).

• Resistance: 1.0960 (R1), 1.1045 (R2), 1.1100 (R3).

GBP/USD hits support at 1.5300

GBP/USD traded lower on Wednesday and managed to hit our support barrier of 1.5300 (S1). The short-term outlook is somewhat negative, but given that UK Q1 GDP is expected to be revised up today, I would switch my stance to neutral for today. I prefer to see a clear move below 1.5300 (S1) before I trust again the short-term downtrend. Such a break is likely to pull the trigger for our next support at 1.5160 (S2). Switching to the daily chart, the rate is still trading above the 80-day exponential moving average, but pretty close to it. That moving average stands marginally close to the 1.5300 (S1) support territory, which makes that zone even more significant. This is another reason I would take the sidelines for today.

• Support: 1.5300 (S1) 1.5160 (S2), 1.5100 (S3).

• Resistance: 1.5440 (R1), 1.5525 (R2), 1.5700 (R3).

USD/JPY breaches the 124.00 hurdle

USD/JPY rocketed higher following the violation of the 122.00 area on Tuesday and managed to reach and break the 124.00 (R2) territory, marked by the highs of June 2007. The short-term picture remains positive, and therefore, I would now expect the bulls to challenge the psychological barrier of 125.00 (R1). Our short-term momentum indicators detect strong upside speed and amplify the case for further advances. The RSI stands within its above-70 territory and points up, while the MACD lies above both its zero and signal lines, pointing north as well. As for the broader trend, the break above 122.00 confirmed a forthcoming higher high on the daily chart and signaled the continuation of the longer-term bullish trend.

• Support: 124.00 (S1), 123.50 (S2), 122.80 (S3).

• Resistance: 125.00 (R1), 125.80 (R2), 126.60 (R3).

Gold consolidates above 1185

Gold traded in a consolidative manner yesterday, staying marginally above the support zone of 1185 (S1). The break below the key barrier of 1200 (R2) on Tuesday turned the short-term picture negative, in my view. I still expect the metal to challenge the 1180 (S2) hurdle soon, but I would I would be careful of a possible upside corrective wave before the bears prevail again. The reason is because the RSI exited its oversold zone, while the MACD has bottomed and could cross above its trigger any time soon. On the daily chart, gold has been trading in a non-trending mode since the last days of March. Therefore, although I see a negative near-term picture, I would hold my neutral stance as far as the overall picture is concerned.

• Support: 1185 (S1), 1180 (S2), 1170 (S3).

• Resistance: 1195 (R1), 1200 (R2), 1209 (R3).

WTI finds support at 57.40 and rebounds

WTI found support at 57.40 (S1) on Wednesday and rebounded to hit resistance at 57.85 (R1). The short-term outlook is negative in my view, therefore a clear move below 57.40 (S1) could pave the way towards our next support area of 56.55 (S2). However, taking a look at our short-term oscillators, I would be careful that an upside corrective bounce could be on the cards before the bears prevail again. The RSI raced higher and is now approaching its 50 line, while the MACD stands above its trigger and points north. As for the broader trend, the break above 55.00 on the 14th of April signalled the completion of a double bottom formation, something that could carry larger bullish implications in the not-too-distant future. Therefore, I would treat any declines that stay limited above 55.00 as a corrective phase for now.

• Support: 57.40 (S1), 56.55 (S2), 56.00 (S3).

• Resistance: 57.85 (R1) 58.35 (R2), 58.95 (R3).

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