Euro Firms after Greece Announces More Budget Cuts
The Euro is firming overnight after Greece announced more budget cuts
in an effort to sway the European Union into approving its bailout
package.The new plan includes higher
taxes and pay cuts for government officials. Greece has been making an effort to
shore up its fiscal deficit in order to convince the EU and investors that it
is committed to taming its budget crisis. At the same time, there is talk that Greece is
prepared to go to the International Monetary Fund if the EU fails to come
through with sufficient aid.
Technically, the EUR USD confirmed Tuesdayâ€™s closing price
reversal bottom with a follow-through rally last night. The current rally is
getting close to the last main top at 1.3692. A trade through this level will
turn the main trend to up for the first time since December 7th, 2009.With a record amount of short positions
against the Euro, a change in trend and a resolution to the Greek budget crisis
could trigger the start of a massive short-covering rally back to 1.4000. Gains
could be limited if shorts donâ€™t budge and if the developing deficit crisis in Spain flares
up. Talk is circulating that hedge funds may face new regulations. If this
story proves to be true then look for the short-covering rally to begin soon.
The GBP USD is gaining back some of its loss from earlier in
the week because of the firmer Euro and on speculation that capital will stay
in the U.K. if Prudential PLCâ€™s takeover of AIA Group, Ltd. is delayed. The
developing move looks like short-covering rather than trend changing. The poor
state of the U.K.
economy, its budget deficit and a dovish monetary policy should continue to
keep a lid on appreciation. Furthermore, concerns that the Labor Party may gain
a majority stake after the upcoming election should continue to keep downside
pressure on the British Pound.
The Dollar is trading slightly lower against the Yen
overnight as traders remain a little tentative that a resolution to the Greek
budget crisis will be reached soon. After failing to regain a key 50% price
level at 89.30, downside pressure helped push the USD JPY toward the .618
support level at 88.24. Buying came in last night after a break through the
last bottom at 88.55 failed to encourage more selling pressure.A closing price reversal bottom today or
regaining the 50% level will be a sign that a short-term bottom has been
The rally in the Euro is helping to pressure the USD CHF.
Traders are selling this pair in anticipation of a deal between Greece and the
European Union. A stronger Euro reduces the need for the Swiss National Bank to
intervene to protect its economy. The charts indicate that downside pressure
could take this market down to 1.0513 over the near term.
The USD CAD is trading lower, but inside of yesterdayâ€™s
range. Downside pressure is coming from a pick-up in demand for higher risk
assets as investors feel more confident that Greece and the European Union will
reach a bailout agreement.Yesterday the
Bank of Canada voted to leave interest rates unchanged but left open the door
for a rate hike after June if the economy continues to heat up. Earlier in the
week it was reported that Canadian GDP grew by 5.0% versus pre-report guesses
Despite a 25 basis point rate hike by the Reserve Bank of Australia on
Tuesday and a slight pick-up in demand for higher risk assets, the AUD USD is
trading lower. Last nightâ€™s rally stopped short of taking out the most recent
swing top at .9070. Buying pressure dried up as the market neared this level.
Additional resistance is coming from the .618 retracement level at .9042. With
risk sentiment shifting, look for buyers to step in following a short-term
retracement, provided .8953 holds as support.
The NZD USD remains under pressure because of concerns over
the weakening economy. The stronger Australian Dollar and signs that the Euro
may begin rallying are also putting downside pressure on the Kiwi.
Besides news regarding the debt crisis in Europe,
Forex traders will be focusing on todayâ€™s Challenger jobs report and the ADP
private sector jobs report for direction. Traders expect the ADP report to show
a loss of 20,000 jobs. An amount greater than 20,000 should support the Dollar
as it will indicate a weaker economy.Later in the day, the Fed releases the Beige Book of economic
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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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