Do Market Miracles Happen?

No Market Miracle:
The countdown to a Greek default is now at 5 days.

After yet another breakdown in negotiations last night, it looks as though markets will head into the weekend close without Greece moving closer to a deal with it’s creditors.

There was no shortage of headlines overnight causing EUR/USD to whipsaw up and down but no new progress to report and after a drop on rumours of a deal being reached, EUR/USD ended up back where it began almost immediately.

EUR/USD 5 Munute:

“Institutions unanimously agreed on Greece papers.”

“Greece and its creditors fail to reach compromise ahead of the Eurogroup.”

The thought process behind these moves is almost comical with traders having to ask themselves a few questions:

1. Is the headlines factual?
2. Will the headline be denied?
3. Is this actually Euro positive or negative?

The fact that the 3rd question is still being asked is mind boggling. Everyone has an opinion, but markets just do not know what is going to happen.

Focus on the Certainty
Let’s take a look at the USD side of EUR/USD.

It is looking more certain that the Fed will begin to raise rates in September and no matter how potentially positive markets interpret a Grexit, on history EUR/USD is more than likely to begin a push towards parity.

From Citi:

“The three months going into the Fed hike of June 1999 saw EURUSD move from 1.09 to 1.01. Anything similar from here would take us close to the trend lows. Alternatively we could look at the price action on EURUSD after the consolidation that ended in October 1999 and see that as the EURUSD downtrend resumed, we fell from 1.09 to 0.97 – a move of 12 figures which if replicated here would bring us a little closer to parity (certainly lower lows for the trend).”

Interesting to talk about making new lows when you look at the resistance zone that price currently is pushing down from. There is definitely an opportunity to be building shorts around the headlines.

EUR/USD Daily:

On the Calendar Today:
The Asian Session calendar had already been emptied before Sydney traders had taken their desks with the highlight being a brilliant Trade Balance number out of New Zealand already reversed on the back of a good old RBNZ jawboning.

The headlines out of Europe will again be the focus heading into the weekend with progress again expected the be limited.

“If it wasn’t for the last minute then nothing would ever get done.”

Friday:
NZD Trade Balance (350M v -90M expected)
JPY Household Spending (4.8% v 3.5% expected)
JPY Tokyo Core CPI (0.1% v 0.1% expected)

EUR EU Economic Summit
GBP BOE Gov Carney Speaks

Chart of the Day:
Following a post in the Technical Analysis section of the Vantage FX News Centre, we rode USD/CAD up to channel resistance on the daily chart. The fact that it was with the overall trend and following the narrative of USD strength at the time made the trade all the more appealing.

USD/CAD Daily:

After pausing at this channel resistance level, price has come back off it slightly and given a nice zone to manage our risk around. Any time you get a confluence of support or resistance like this, it gives more confidence in the significance of the level.

As you can see, the zone has been tested on both sides multiple times, with the last test coinciding with trend line resistance from the channel.