Forex Market Commentary
Greece defaults on its obligation to meet an IMF payment of 1.7 billion Euros today Tuesday. This is the first time a developed European nation has defaulted to the IMF. Worse - Greece will ask its citizens on July 5th in a referendum if it should meet bond creditors offer of restructuring. Evidently nations can borrow and then walk away. So how did we get to this position? Quite simply we have to go back 15 years to where Greece joined the Euro currency and started to borrow cheap money largely thanks to the strength of the German economy and live beyond their means.
It came as no surprise that the markets didn't even over react. Initailly the brunt of displeasure came in the European markets. The Euro Stoxx 50 equity index dropped 4% and the 10 yr German Bund yields fell 9 bp to 0.92 percent. But in the USA, the Dow had a modest day climbing 23 points. The Euro currency also stood its ground. USDX climbed a little and both crude and oil stood there ground. If this was supposed to be the kind of dramatic news that moves markets and become a game changer then today certainly saw the most dramatic silence as most of the markets shrugged off the Grexit with all hopes of the best for Europe! in other words the market already expects bond holders to get stuffed by Greece and for Europe to steam ahead with a more coherent and disciplined basket of currencies. For 15 years the German government has literally carried the greek excess for the common good of the Euopean currency experiment and now everyone is getting tired of it.
So if Grexit didnt move the currency markets what will it take that could possibly form the new news that could take currencies into a direction?
1. A successful Q.E program of the ECB coupled with growth in the European economies and their equities markets leaves the potential for bond yields to rise.
2. If the rate of economic growth in the European zone starts to pick up at a pace greater than the current US economic projection then we are going to see difference in the Bund and US Treasury yields narrow.
3. With China being the workhorse of the new global triumvirate of USA, Europe and Asia (China + Japan) the political need to keep the Chinese equity markets pumped up with cheap US credit becomes paramount in order to create consumer demand in both Europe and asia for American goods and services and keep American companies working it with grease and elbows.
4. As China and India grows the means for crude oil and commodities like iron ore and copper will become important and so commodity inflation will rear its head in modest guises next year.
These 4 factors portray rising an increasing probability of demand for the Euro currency and not the US Dollar parity that was being speculated about in the press a year ago.
Although the EUR/ USD is finding it tough to push towards the 1.15 at the moment the EUR/ USD is increasingly looking like an appreciable currency again with more odds for it to rise than to slip again back down to the 1.05 mark. Net shorts are diminishing weak by weak as large specs focus on bond differentials between the 2 economic areas as a sign for direction. Any serious testing of the 1.15 will heavily depend upon US economic data releases for Q3.
Please read on Reuters today the following article on US oil production to amplify the growing output in crude oil as world demand rises.
http://www.reuters.com/article/2015/07/01/us-usa-crude-eia-idUSKCN0PB35Z20150701
http://www.bloomberg.com/news/articles/2015-06-29/americans-can-t-sell-stocks-fast-enough-as-rally-beats-outflows
Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.
USDX
US Dollar
95.567 +0.038 +0.05%
95.567 +0.038 +0.05%
Support 93.653 Resistance 97.343
Forward 1 year - 95.943. Low growth positive line.
Forward 1 year - 95.943. Low growth positive line.
EUR
1.114005 -0.005695 -0.51%
1.114005 -0.005695 -0.51%
Support 1.08430 Resistance 1.15030
Forward 1 year - 1.13770. Low growth positive line
Crude Oil
58.77 -0.70 -1.20%
Support 57.32 Resistance 59.78
Forward 1 year - 61.31. Low growth positive line.
Forward 1 year - 61.31. Low growth positive line.
Gold
1174.200 -3.625 -0.31%
Support 1,165.5 Resistance 1,194.3
Forward 1 year - 1,186.2 Low growth line.
Pieter Bergli - DeLoren Trust Holdings
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Forex market commentaries and media reports for free
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Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers
Pieter Bergli - DeLoren Trust Holdings
A non-profit commitment to provide education on the properties of currency markets
Forex market commentaries and media reports for free
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers
