Greek comments alleviate downside bias in EUR/USD

Yesterday’s market action

We saw the earnings reports continue to flow through the newswires, the majority posting not-as-bad- as-expected. Facebook, the largest cap NASDAQ listed company to report overnight, posted a beat on the EPS by 2 cents and a slight miss on the revenue. The negative sentiment caused by the strength of the dollar over the previous and current quarter has not taken as big a toll as many analysts have been expecting and the revenues, although some worse than expected, have not been drastic. The real challenge comes tonight aftermarket where we see Microsoft and Google post earnings; as chief complainers of a strong dollar last quarter it will be a good reference point to measure performance against. After the aggressive sell-off in morning trade we witnessed a stellar rebound in US equities; the S&P moved to retake the 2100 handle as well as the NASDAQ making new highs on the session. The surprise move for the day came on the Bund where we saw, according to Deutsche Bank, the largest daily percentage increase in yield since the 1920s. However pointless, for price it translated roughly as a 107 tick move from the morning 9am high to the lows at 8pm last night. This move was reflected in the US10yr also as we saw a large scale push lower as we saw stocks return to the highs during afternoon trade. I’ll include a comparison chart on the Amplify Website blog.

Today’s View

We saw a similar move this morning with global bourses taking a leg to the downside off of worse than expected European PPIs but we have since seen a trace higher as positive news from Greece. A Greek Government Official stated that “an agreement between Greece and their creditors is near.” This allowed the move lower to reverse and reclaim higher areas of resistance: The Euro, which pushed below the 1.0700 handle this morning, has also pushed higher to the pivot area on the back of the Greek developments. Sterling this morning has been fairly difficult to trade with opportunities being very small windows. The UK Retail sales figures disappointed with a reading of 0.2% against the expected 0.5%; this pushed the pair 50 pips to the downside however this has once again retraced back higher, most likely due to the fundamentally-driven move higher in the EURUSD, to test the 1.5000 handle. This held as resistance after a brief foray higher but this has since contained price action. Ahead today we have one of the biggest days on the Earnings calendar. The aforementioned Google, Caterpillar and Microsoft posting today will be the yard-stick at which many participants base their sentiment upon. Caterpillar reports at 1230BST with an expected EPS of $1.34 and a revenue of $12.27bn. Google are expected to post $6.63 EPS aftermarket and Microsoft a lower $0.53 EPS. At 1330 we have the usual culprits of Initial Jobless Claims, expected at 287k and 2290k for the continuing claims. Manufacturing PMI and New Home Sales are expected subsequently with an expectation of 55.7 and 515k respectively.