Greece headlines pressuring EUR/USD, sell any rebounds

The Day So Far

This morning saw European equity markets opening a decent amount below Friday’s close in response to the break down in talks between Greece and their creditors over the weekend. The situation now moves towards the latest last ditch talks due at the Eurogroup meeting on Thursday this week. We have had so many ‘last’ ditches already that the European landscape is beginning to resemble the trench warfare of past eras. The news flow so far today has been dominated by Greek Government Spokesman comments as well as comments from EU’s Juncker. Greece’s Government are still trying to paint a positive picture by saying things like ‘Greece will have the ability to pay the IMF at the end of June because a deal with their creditors will be reached’. However, it does not appear that Greece are willing to improve on their current offering, which is an offer their EU creditors are not prepared to accept. So we move towards Thursday’s meeting with a certain amount of trepidation because we do not feel a deal will be done. European equities have been stable below Friday’s close following the initial weakness at the open, but we go into the afternoon with a bearish bias. T-notes have been tracking the Bund, which opened higher but as of yet has failed to extend that safe haven bid tone. EURUSD opened lower and tested the 1.12 handle, rebounded to test Friday’s close around 1.1280 and now trades mid range. Crude oil has seen the biggest move of the morning continuing the downtrend from the latter half of last week. After finding resistance at the $60 handle crude then trading down towards $59 as news filtered through that Libya's output increased to 500k barrels per day last week.

The Afternoon View

US data this afternoon comes in the shape of Empire State Manufacturing and Industrial Production. In a week where the Greek risk remains at the top of the list, Mario Draghi’s comments this afternoon will be given a lot of attention. We have a risk-off view and expect equities to continue Friday’s sell off. We expect T-Notes to push higher along with the Bund. We are less committal on the EURUSD, but would look to short any push back towards the morning’s high. For crude oil we also have a short bias, last week’s high just below $62 confirmed the two month range and we expect the market to track back below $58 in the next day or two.