Greece will have to rely on the good nature of their neighbours

Yesterday’s market action

Friday saw several key pieces of data disappoint US bulls as US Empire Manufacturing, Industrial production and the University of Michigan Sentiment all printed below consensus. The Michigan Sentiment figure printed the lowest reading since October 2014 with a print of 88.6. This set about a large scale reversal in both the EURUSD and GBPUSD; the EURUSD moved from the low at 1.1328 to the previous day’s high at 1.1457 over the period of 3 hours, ending the theme of a range in favour of USD strength. The US10YR and 30YR both ended the session marginally higher on the back of the weaker results and, in a muted reaction, the S&P 500 made another new all-time high on rate-hike risks being moved further back. Due to the recent slumps in US data we have seen the large pricing out of a June rate-hike; there are analysts speculating on a contraction in H1 of 2015 as we are seeing continued underperformance across the US data-space. In addition to a negative outlook on US data, analysts are also expecting a limited outlook for European Growth in 2015 also. The Greek situation is not aiding matters as we have seen the Greek Government empty their wallets to pay back the International Monetary Fund’s bill of €750bn on the 12th of May; the only way they were able to fulfil this financial obligation was by utilising the IMF’s “Special Drawing Rights” facility, borrowing money from the IMF to pay the IMF back. Go figure. With the Greek situation’s end on the horizon it seems as though Greece will have to rely on the good nature of their neighbours and/or adopt a greater willingness for compromise; many see a situation which avoids capital controls but only at the cost of the Greek Government’s stubbornness to compromise. 

Today’s View

This morning has seen price action technically bound in most products. We have seen oil test the highs of the 14th around the 60.84 level as traders began to react to supply-centric news that IS have taken the town of Ramadi, a town 60 miles from Iraq’s Capital. Although production remains unchanged and crude supply is still in glut territory we see crude appreciating. This has been largely attributed to many Hedge funds taking active roles in keeping price elevated. The dollar has been on the front foot with minor gains against Sterling, the Yen and the Australian dollar, exhibiting some minor risk-off overall. The euro remains strong in the face of the greenback however, remaining effectively flat on the day as price action converges around the pivot level. After last week’s abhorrently empty data calendar we return to the list with a sense of disappointment- the only major headline of the day is the NAHB housing market index, due at 1500BST with a reading of 56. As there is no other data-flow today traders are advised to remain conservative in profit targets where possible, relying on solid technical entries to ensure a secure trading strategy. The interesting trades in play today could be Oil testing the high of the year, the S&P 500 making a new all-time high if we can retake the pivot level to the upside and the continuation of the medium-term dollar weakening phase against sterling and the euro.