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Euro Pressured as Greece Situation Remains Unresolved
Euro is back under pressure the uncertainties over the Greece situation remains unresolved. While the privatization proposal was approved, there is still a political hurdle to overcome before getting the new EUR 6b austerity plan approved. And, there are rumors of the Greek government wanting to call a snap election. The deadlock could jeopardize both payments of the next installment of EUR12b due in June as well as talks over a second bailout of EUR 60b. Another big question is whether Greece would finally need to structure its debt and what would be ECB's eventually response if that happens. Also, restructuring of Greek debt would open the door for more problems of Irish and Portuguese restructuring.
EUR/USD's recovery was weak and brief and failed to sustain above 1.41 level and the pair will likely break 1.4 psychological level again in near term. EUR/CHF will also likely make another record low below 1.2323 sooner or later as selloff resumes. XAU/EUR which made new record high today worths paying attention too. The cross will be facing upper trend line resistance at 1091 soon as the current rally extends. We're still anticipating strong resistance from there, at least initially, to limit upside. But a strong break of 1090/1100 level in XAU/EUR could trigger steeper selloff in Euro elsewhere.
Aussie is also sharply lower today as Asian equities are broadly sold off on concerns on earning growth as well as the Greece situation. Canadian dollar is also soft as Crude oil struggles below 100 level. Sterling is relatively resilient though, as supported by buying against Euro. Yen is seen higher in general on risk aversion while Dollar index continues to stay above 76 level for the moment.
On the data front, Japan trade deficit came in slightly narrowed than expected at JPY -0.5T in April. Australian conference board and westpac leading indicators rose 0.4% and 0.5% respectively in March. German Gfk consumer sentiment dropped slightly more than expected to 5.5 in June. UK Q1 GDP revision will be a main focus in European session. From US, durable goods orders and house price index will be released.
We talked about weakness in AUD/NZD yesterday and the aussie is also seen weak against yen this week. AUD/JPY could have just broken out from a small triangle pattern and is resuming the fall from 89.57. Bias is back on the downside for 84.30 support first. Break there will also confirm that whole correction pattern from 90.90 has resumed for 50% retracement of 74.48 to 90 at 82.24. We'll stay cautiously bearish as long as 86.90 minor resistance holds.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 114.79; (P) 115.48; (R1) 116.24; More
EUR/JPY's recovery was limited by 4 hours 55 EMA and weakens but downside is still contained above 113.39/54 support. Intraday bias remains neutral and some more sideway consolidations could still be seen. On the downside, sustained trading below 113.54 support will indicate that whole rebound from 106.57 has indeed completed at 123.31 already. In such case, further fall should be seen to retest 106.57 low next. On the upside, however, break of 117.57 resistance will argue that choppy decline from 123.31 has already finished. Also, this will indicate that rise from 106.57 is not completed and turn focus back to 121.82 resistance.
In the bigger picture, the current development argues that medium term rebound from 105.42 has possibly finished with three waves up to 123.31. In other words, it's merely a correction pattern inside the down trend from 2008 high of 169.96. Sustained trading below 113.54 support will pave the way for a retest on 105.42 low first. On the upside, however, break of 123.31 will revive that case that down trend from 169.96 has indeed completed at 105.42 already and will turn outlook bullish again.
Market Overview | Written by ActionForex.com | May 25 11 07:09 GMT
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