Greek stalemate to drag on

Market Commentary

Major talk over night was on the Greek referendum and the associated ‘No’ vote. Unfortunately of the two scenarios the ‘No’ vote has left the markets with the most to work out. The Greek Government stating they think a deal could be within the next 24 hours but the markets pricing in the fact that we are likely to see a withdrawn stalemate to the whole situation. Expect talks to resume on Tuesday and continue and therefore markets to remain headline driven for the next while. Unfortunately despite some decisive comments we expect the Greek stalemate to continue for some time and suggest traders prepare accordingly.

The Euro gapped lower at the open affecting both EURUSD and EURJPY. We saw a similar situation last weekend which then proceeded to retrace the entire gap throughout the day leading to one of the worst days for CTA’s in history (Currency Trading Funds). Overnight, the pairs closed the gap and as of the open are now trading towards the close on Friday.

EURUSD opened just below 1.100 with EURJPY opening below 134.00. We now need to be careful for headline risk as well as the light volume driving the current directions in all Euro crosses.

GBPUSD opened slightly lower on the news all be it with far less impact than the Euro crosses. USDJPY also opened lower on the general risk off theme. Both pairs opened at their respective support levels with USDJPY opening at the 121.93 mark and GBPUSD opening at the 1.5549 level.

Light news day today, bar US ISM numbers in the afternoon, means that there will be additional focus on Greek headline risk.

Following the news from Greece there has been some Interesting comments out of several of the banks now suggesting that not only is a Greek exit ‘Grexit’ from the Eurozone the most likely scenario and that the actions surrounding the referendum could result in a delay to the US rate hike, initially estimated at September now being pushed to December.

We expect talks on Tuesday to furnish some further information but hold out little hope for an early deal although we aren’t in agreement yet that ‘Grexit’ is the only option. We would suggest traders prepare for drawn-out talks over the next few weeks; if we get an early resolution then great but some relatively choppy headline chasing price action is likely to occur with support and resistance strategies in line with order flow the best possible options along with breakout trades.

Technical Commentary

EURUSD

Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

Following a gap open the pair has rebounded nicely to fill the initial gap. We expect relatively light volume today as market participants prepare for a Eurogroup meeting tomorrow although early resolutions from any talks seem unlikely.

Euro has been relatively strong lately and well supported with 1.1020, 1.0989 and 1.0952 now offering key support.

Daily Order Flow bearish; OBV down, Linear Regression and Psychology.

Strategy: Monitoring intraday price action around the 1.1000 resistance level. Strong rejections could offer good value shorts.

GBPUSD

Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

Gap at the open to the major support level quickly retraced higher. Key support resides at the 1.5556 level where we have seen the majority of orders overnight. Initial resistance comes in around the 1.5606 level.

Daily Order Flow bearish; OBV down, Linear Regression and Psychology both lower.

Strategy: Monitoring intraday price action at the key resistance level of 1.5606. Strong rejections could offer good value shorts.

USDJPY

Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish to Neutral

Like the Euro crosses this pair gapped significantly lower at the open and retraced the gap prior to the London session open. Majority of the orders overnight coming in slightly above the 122.30 level.

Initial resistance comes in around Fridays close at 122.80 followed by next major set of orders at 123.053.

Daily Order Flow Bearish ; OBV sideways, Linear Regression lower, Psychology lower.

Strategy: Monitor intraday price action around key resistance levels.

EURJPY

Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

Pair has retraced the large gap lower at the open prior to the London session in a similar story across most Euro crosses. Key resistance and orders sit towards the London session open in the pair at 135.43 with intraday support coming in at 134.80.

Next major resistance in the pair comes in around 136.20.

Daily Order Flow bearish; OBV down, Linear Regression and Psychology bearish

Strategy: Monitor intraday price action around key resistance levels. Strong rejections could offer good value shorts.