The Euro, NZD, Gold, WTI Oil and DAX

The EURUSD has encountered bearish momentum following the reports that Greece ordered local governments and enterprises to put cash into the central bank ahead of the likely default of an IMF payment on the 1st of May. While the EURUSD has enjoyed a modest recovery in recent weeks, the increased possibility of a Greece default could be the driver that pushes the Euro down to parity with the USD. Recent market commentary on the Eurozone has been more positive recently, with the ECB’s continuous stimulus measures appearing to be having a positive impact.

If the situation in Greece continues to intensify and weighs on investor sentiment, we are likely to see a kneejerk reaction from investors as the possibility of a Greek exit gets priced in again. In the longerterm, the prospects for the Euro are appearing more positive and further USD weakness would improve the prospects for the EURUSD. In the short term though, the situation in Greece will continue to weigh on investor sentiment and it would not be a surprise if Euro pressure intensifies as the Greece deadline fast approaches, we might even see the EURUSD approach 1.046.

The NZDUSD took a tumble after inflation data came in much worse than what was expected. This is the second quarter of dips in inflation and the markets will now be looking for dovish comments from the Reserve Bank of New Zealand (RBNZ) to talk down the New Zealand Dollar. The NZD has appreciated heavily against the AUD and the RBNZ are likely to make exports competitive against both its major trading partner, while also weakening the NZDUSD. The NZDUSD has recently touched a threemonth high just above 0.77 and I am certainly looking for lower lows in the coming weeks. The NZDUSD has recently touched key resistance around 0.765 and the market could be looking to turn this into selling momentum.

The oil markets have opened up with the bulls looking to make their mark and test higher levels. I am still looking for WTI Oil to test the $59 level before we see major pullbacks on the charts, and it’s likely we could in turn see further falls to at least the $55 dollar level as a lower low has been forming while oil has stagnated while also looking for further momentum higher. With WTI Oil rising despite the oversupply concerns remaining strong, pullbacks in price could be the number one opportunity for traders as this week’s trading session commences.

Gold fell to $1191 following upbeat comments from a Federal Reserve spokesperson, who said we should expect rate hikes to be in line with market expectations. However, these comments came from Rosengren (a dovish speaker) who also believes that US growth needs to be around 2.5% to 3% before we have a lift off in US interest rate increases.

Either way, it does appear that interest rate expectations are being pushed back and with low inflation remaining a concern – we are probably not going to see any real movement in interest rates until the end of the year. Global concerns over the possibility of a Greek exit could also weigh on market sentiment, slowing down the possibility of global growth. All in all, I still feel that Gold is likely to look higher in the charts and more importantly, traders could look to hedge towards Gold as the risk of a Greek exit increases.

The DAX has opened up stronger on the charts after failing to break support at 11629. The DAX has been lifted by comments from the ECB that Quantitative Easing (QE) has so far worked remarkably well, and many believe that the Eurozone could weather a Greek exit when it comes to the equity markets. However, the banking sector may suffer a bit in the short term and it will be interesting to see if the EU stress testing has been preparing for such an event.

I remain bullish on the DAX and am still looking for higher highs, as growth in Germany is expected to be lifted and the strong bullish sentiment continues to dominate after a successful round of QE. Certainly a push to 12392 is certainly on my horizons again, though this week might be tough given the 1st deadline in Greece.