Greece back in focus

Forex News and Events:

Spanish borrowing costs skyrocketed today as investors moved back heavily into to risk-off territory. The yield on the 10-year Obligacion rose as high as 27 basis points to 7.5650% around European opening time. Italian yield for a similar security also jumped 21bps, reaching a higher level than Ireland for the first time since 2009. Spanish regions, namely Catalonia and Valencia, are lining up to tap EUR 18BN from the fund as they prepare to meet debt commitments. European equity markets also opened in the red with the IBEX dropping 3.58% at 09:15 GMT, followed by the FTSE (-1.53%) and the DAX (-1.43%). Spanish economy minister Luis de Guindos tried to reassure markets saying the country will “absolutely not” need a bailout. The situation in Spain is aggravated by the Troika’s visit tomorrow to Greece with the goal of assessing the debt burden situation before releasing a chunk of the help due in August.
German officials have been vocal about the necessity of a “Grexit” in case the nation failed to reduce its debt-to-GDP ratio. As a matter of fact, Philippe Roesler announced he were “very skeptical” about European leaders’ capacity to save Greece because he sees that Greece will “probably not be able to fulfill its conditions”, and if it doesn’t, then there cannot be any more payments. German MP Alexander Dobrindt went even further, asking Greece to start paying half its pensions and public employee salaries in drachmas to prepare gradually for an exit from the Euro zone. The IMF had said in March that it would not be allocating further funds to maintain Greece solvent and did not give any indication on whether it is intending to hold its stance should the country miss its targets. The German finance ministry says it had no information on the position of the IMF but it is “hopeful” Greece will fulfill its bailout conditions. However, the government is late on its privatization schedule, having so far brought EUR 1.8BN out of the EUR 50BN it aims to raise by 2020. 

Today's Key Issues (time in GMT):

2012-07-23T01:30:00 AUD AU PPI (QoQ)
2012-07-23T09:30:00 EUR GE 12-Month Bubill Auction
2012-07-23T12:30:00 USD US Chicago Fed National Activity
2012-07-23T14:00:00 EUR EU Consumer Confidence (Prelim)
2012-07-23T15:30:00 USD US 6-Month Bill Auction

The Risk Today:

EURUSD Risk appetite reversed aggressively on Friday and since then the only trade has been risk-off. The pair seems monetarily content to trade sideways this morning – however, the collapse of 1.2152 support and with the pair unable trade above the 5d MA, we expect the next move to be lower (no solid support until 1.1870). The sell-off has been gaining momentum, and we would continue to look to reload shorts on rallies. Should bullish momentum continue to fade, the first levels of support can be found at 1.2000 (psychological support) then 1.18670 (7th June low), and 1.1772 (30th Dec 05’ low). Should the pair break the 1.2336 resistance, the first bids will be positioned at 1.2439 (Multiple support and resistance in June), 1.2685 (June 19thhigh & June 20thlow), 1.2754 (June 20thhigh), 1.2826 (22ndMay high), 1.2906 (support turned resistance), 1.3066 (8thMay high), 1.3081 (gap high), 1.3122 (2ndMay low), then 1.3179 (7thMay pivot high).

GBPUSD The bullish momentum in GBPUSD is definitely waning and has triggered fresh selling, causing the price to nearly dip back in downtrend channel. Unfortunately for our bullish call, the pair has not managed to hold onto the gains at all since Thursday rally peaked at 1.5739 – taking us back down below $1.5547 levels today. A daily close within the downtrend will reinstate our bearish bias and we would then go short and aim for a target of 1.5390 range support. The first zones of supply will be located at 1.5520 (downtrend channel top), 1.5405 (8th June low), 1.5390 (6th June low), then 1.5266 (13th Jan low). The next resistances lie 1.5663 / 78 (June 18th & 19th lows), 1.5739 (18th July high), 1.5776 (23rd May high), 1.5845 (22nd May high), 1.5954 (1st Mar pivot high).

USDJPY Last week, the USDJPY’s made short work of all demand regions in its path and the bearish momentum doesn’t seem to be waning today. Now that the bears have had time to re-group and push through 78.00 (77.94 low), there is plenty of space on the downside to explore with very few support levels to tackle and putting us on course for our 77.66 target. Should USDJPY break below the June 6th pivot low and downtrend top, the next areas of supply will be lying at 77.66 (1stJune low), 77.36 (13thFeb low) then 76.58 (3rd& 17thJan low). The next levels of resistance remain unchanged at 79.16 (18thJuly high), 80.21 (reversal), 80.62 (2ndMay high), 81.60 (failed corrective rally), 82.56 (6thApril high), 82.99 (3rdApril high), trigger resistance at 83.40.

USDCHF USDCHF Fridays move broke back above 2012 high and suggests the bulls have the numbers to keep the upside momentum going. The pair hit a high of 0.9939 on a choppy gapping open today. After a very short correction to 0.9900, the pair is now grinding towards parity. The next resistances can be found at 1.0000 (psychological resistance), 1.0070 (1st Dec 11’ pivot high), 1.0149 (2010 pivot), then 1.0294 (10th Sept 10’ high). The first levels of support continue to be at 0.9738 (old resistance turned support), 0.9683 (June 4thpivot high), 0.9584 (5th July close, 6thJuly opening), 0.9419 (17th June low), 0.9369 (21st May Support), then 0.9183 (7th & 11th May low).

Resistance and Support: