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Greek saga can not only collapse euro, but also give reasons for optimism

Greek saga can not only collapse euro, but also give reasons for optimism

The common currency faced positive news at last. Yesterday inactive trade finished with sharp leaving from the range upward. The reason was informational messages about probable compromise between new Greek government and the EU. Today the Minister of Finance of Greece is to meet with his German colleague to discuss the details of the agreement. According to market’s reaction, common grounds are already found. One of painful points of the Eurozone can leave the agenda for some time. The market readily answered to this positive – dollar retreated on wide spectrum of currencies. Technical factors in the form of dollar’s overbought had an impact, as well as fundamental ones – recently US statistics have given contradictory signals. Yesterday production orders fell and were worse than predicted again, besides, production ISM of New York dropped sharply.

Today there are few statistics in the Eurozone – final evaluation of PMI business activity in service sphere and retail sales in the Eurozone. Forecasts aren’t very negative there – mixed PMI and moderate rise in demand from consumers. It can give euro one more opportunity to test yesterday’s maximums. Still, there is a fly in the ointment – expected report on GDP of Italy for the 4th quarter may recall more fundamental factors of euro’s weakness. The situation remains unstable. Today ADP report on employment in private sector and ISM business activity in service sphere will be published. Now employment is the strongest part of American statistics, and there are no signals of worsening. However, fall of oil price will certainly have an impact on employment in oil production. ISM can decrease slightly like production, still, it should be taken into account that both of them are above 50 points, what indicates continued growth. Despite strong correction, it is too early to talk about change of dollar’s trend.

Speaking of local data of this day, we’d like to highlight PMI in British service sphere. Yesterday the similar indicator of building sector increased unexpectedly, what became an additional incentive for pound’s growth and coincided with general mood of the market. New positive will give one more incentive for growth.

 

Trade tactics:

Yesterday’s mass elimination of short positions gives grounds to think of probable reversal of dollar’s trend. From our point of view, it can be talked with confidence about only after EURUSD closure above 1.1750. And before it euro remains in bearish trend and before it we consider pair’s purchases as a movement within correction, what implies higher risks. However, yesterday’s rally of euro gives grounds to hope for repeated testing of yesterday’s maximums at least. So, we consider two options – EURUSD pair's purchase from 1.1450 – 1.1470 with stop at 1.1330, and pair’s sales from 1.1530 – 1.1540 with stop at 1.1750. In both cases stop should be rearranged at the entry point in the event of price’s shift from of more than 30 points from the entry point.

 

Any opinions, advice, news, research, analyses, prices or any other information presented on this webpage is provided as general market commentary and does not constitute investment advice. "Vector Securities" shall not be liable for any loss, including loss of profit, which may arise directly or indirectly from the use of this information.



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