Euro Falls as Uncertainty remains over Greek Bailout Package
The Euro was under pressure throughout the New York session as uncertainty over the
Greek bailout package encouraged more selling. Downside momentum dried up as
the market approached last weekâ€™s low at 1.3443. This triggered a late session
short-covering rally which helped erase close to half of its losses.
Optimism over a possible deal between the European Union and
waned as traders grew impatient over the lack of progress toward a resolution
regarding the Greek debt crisis. A week-end report from the Wall Street Journal
citing the possibility that Germany
and France would bail-out Greece to the
tune of $41 billion failed to generate any strong buying or short-covering
early in the session. This triggered a relentless barrage of sell order shortly
before the New York
opening. Downside pressure was on the Euro until about the mid-session when it
became apparent that the recent bottom at 1.3443 was going to hold.
Mondayâ€™s action indicates that investors are getting
frustrated with waiting for the deal to be set and with Greeceâ€™s
inability to make additional budget cuts. The only thing that could turn this
market around at this time will be either a concrete resolution to the crisis
or a short-covering rally triggered by fresh foreign buying of the Euro.
The USD CAD fell sharply lower after a report showed that
Canadian GDP grew in the fourth quarter faster than economists forecast. Traders
erased an earlier gain after the GDP report showed the economy expanded by 5%
versus pre-report guesses of 4.2%.
This morningâ€™s better-than-expected GDP report indicates the
economy has enough positive momentum to perhaps trigger a more hawkish
statement from the Bank of Canada at Tuesdayâ€™s policy meeting.This robust report could serve as notice that
the economy is expanding at a pace that would warrant an interest rate hike by
the BoC sooner than the Federal Reserve.
The GBP USD plunged following reports that a poll indicated
that the minority party may win the upcoming election. Such a move will mark
the first time since 1974 that the minority party has gained such power.
Investors feel that this drastic change will stall the countryâ€™s efforts to
shore up the U.K.â€™s
debt issues.In addition, the weaker
Euro also dragged down the Pound as fear swept through the markets over the
possibility that the sovereign debt crisis was spreading to the U.K.
Heightened political pressures along with the poor economy
and the Bank of Englandâ€™s continued easing of monetary policy weighed heavily
on the Pound since early in the session when stops were hit below 1.50.Shortly after the New York opening, the GBP USD has found
support at a .618 retracement level at 1.4854. The successful test of this level
generated some light short-covering, but far from enough to trigger a change in
Demand for higher risk assets because of todayâ€™s strong U.S. equity
markets helped to support the USD JPY. Although the range was tight, the chart
formation suggests that the Dollar is poised to breakout to the upside if a
rally can trigger stops above 89.50. The return of risk aversion should
pressure the USD JPY which could lead to an acceleration to the downside
through the recent main bottom at 88.55.
The weaker Euro helped to support the USD CHF.Although the trend turned down on the daily
chart last week, Mondayâ€™s lack of follow-through to the downside indicated that
short-sellers may have jumped the gun in anticipation of an EU/Greece deal.
Sellers once again pressured the Swiss Franc in anticipation of a lower Euro
and another round of Swiss National Bank intervention.
Demand for higher yielding assets helped to support the AUD
USD and NZD USD. Volatility was high in these two markets on Monday following
mixed reports overnight.
On Sunday night it was reported that the Australian
manufacturing sector expanded at the fastest pace in two years, but that the
current account deficit widened in the fourth quarter. In addition, news that
the Chinese Manufacturing Index fell pressured both the Aussie and Kiwi. Better
than expected U.S.
economic reports triggered a rally in the equity markets which led to increased
demand for higher risk assets. Traders also factored in the possibility of an
interest rate hike by the Reserve Bank of Australia at Tuesdayâ€™s policy
Technically the Aussie closed in a position to change the
main trend up on a move through .9070. The size and duration of the rally will
be determined by whether or not the RBA raises its benchmark interest rate by
0.25 basis points.
An attempt was made in the NZD USD to drive it lower, but
the strength in the U.S.
equity markets helped turn this market around at the mid-session. The close
near the high has this market in a position to challenge the recent tops at
.7057 and .7078.A rally through both of
these prices will turn the main trend to up.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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