Euro hit by Yellen, Draghi and Greece

Quick Recap

Okay, it’s going to be a huge week for the Euro and by extension other Forex pairs after Mario Draghi said over the weekend that structural imbalances between nations threatened the very existence of the monetary union. That’s of course true, and clearly Draghi is trying to get the parties dealing with Greece to come together. But in many ways it is a massive own goal (or one contrived to drive the Euro lower).

Then as if on cue we heard from the Greek interior Minister on Sunday that Greece won’t be able to make the repayment to the IMF in June. “The four installments for the IMF in June are 1.6 billion euros ($US1.8 billion), this money will not be given and is not there to be given,” he said on Greek television.

Grexit is looking more likely by the minute. So this morning the Euro has dipped below 1.10 and is at 1.0992. That’s a long way from the levels near 1.15 earlier this month.

Of course it is in no small part also because everyone from the New York Fed’s janitor (joking) to Fed Chair Janet Yellen is telling the market that the FOMC is still likely to raise interest rates in the US this year. That’s what Yellen said on Friday night our time.

The US economy is inconsistent with the current level of unemployment and the CPI on Friday for April signaled that inflation has stopped falling. That’s why the Fed will be raising rates. But it is very important to highlight that Both Fed Vice Chair Stanley Fischer and Fed Chair Yellen, amongst others, are signalling that this will be a very gradual tightening of policy.

On the day

On the data front today, the calendar is bare in Australia and most of the globe with holidays in the US, UK, France, Switzerland and Germany. In Japan, trade is out.

Here’s the overnight scoreboard (8.25am AEST):

• Dow Jones down 0.29% to 18,232
• Nasdaq flat at 5,089
• S&P 500 down 0.22% to 2,126
• London (FTSE 100) up 0.26% to 7,031
• Frankfurt (DAX) down 0.42% to 11,815
• Paris (CAC) down 0.07% to 5,142
• Tokyo (Nikkei) up 0.3% to 20,264
• Shanghai (composite) up another amazing 2.83% to 4,657
• Hong Kong (Hang Seng) up 1.7% to 27,992
• ASX Futures Overnight (SPI June) -9 to 5,674
• US 10 Year Bond -0.04% to 2.29%
• Australian 10 year bond 2.91%
• AUDUSD: 0.7817
• EURUSD: 1.1000
• USDJPY: 121.52
• GBPUSD: 1.5477
• USDCAD: 1.2285
• Crude: $59.72
• Gold: $1,206
• Dalian Iron Ore (September): 421.5

CHART OF THE DAY: Euro

Nice trade setups over the past few weeks and months.

Break run to next level and break. The low so far has been the 50% retracement but a run toward the next Fibo support at 1.0832 over the course of the week.

Friday I said GBPUSD – what a trendline. When it broke Friday it broke. Look for downside levels now. Somewhat like the Euro move