New Greece Proposals
Greece has submitted new reform proposals ahead of its meeting today with creditors and representatives of the International Monetary Fund and European Central Bank, as the country’s entire banking system is on the verge of collapse. Sources close to the meeting have indicated that the Syriza government is showing flexibility on VAT reform, though not on pensions. While the ECB has continued to expand its support for Greek banks, a decision to discontinue its Emergency Lending Assistance program could subject Greece to capital controls and bail-ins. The Euro was bid higher overnight and has since retreated from gains this morning with EURGBP trending lower.
With stimulus programs still running strong, the Bank of Japan has been deflecting attacks on its credibility, as the Yen rises in a volatile environment. BoJ Governor Haruhiko Kuroda believes that he can still maintain the 2% inflation target, in spite of weak oil prices, and has already formulated its exit strategy alongside the Japanese parliament. The government, meanwhile, has been focusing on its fiscal policy, developing a flexible spending approach rather than firmly limiting spending to fight the deficit. USDJPY is trading slightly higher than it did overnight.
Oil has been trading within a narrow range in spite of steadily rising production and soft demand, although with considerable intraday volatility. The price consolidation is expected to continue; however, medium-term price recovery is facing increased production both in the US and elsewhere. Saudi oil could easily reach 1.5-2 million daily barrels per day in additional output and Libya is swiftly attaining its 800,000 mark. Technically speaking, continued consolidation usually results in a potential volatile breakout; and benchmarks already displaying 2 to 3% intraday fluctuations could be tumultuous. With the asset providing reduced directional opportunities, traders have been paring down short and long positions. Both WTI and Brent have rallied about $1 per barrel since markets reopened.
EURCHF Downward Trending Channel Trading Opportunity
The Swiss Franc continues to gain on broad risk-aversion across currencies as the weakness in the dollar combined with the uncertainty surrounding Greece creates demand for safe-haven assets. Even with the Swiss National Bank leaving interest rates unchanged at -0.75%, the Central Bank has left investors undeterred from pursuing the Franc as a safety-asset. EURCHF continues to trend lower after bouncing from the sharp spike in January as resurgent fears of a global downturn sap strength from risk assets. The downward trending channel pattern has a bearish bias with the ideal strategy comprised of initiating short positions from the upper channel line targeting the lower channel line. Fighting the downtrend is not suggested due to the worsening reward potential and increasing risks.