Withholds $1.7 billion payment
Greece will not receive an extension of its European Stability Mechanism facility from creditors after Germany dismissed the idea. The country has asked for an extension of terms regarding its overdue IMF payment, and a second bailout package also expired overnight. A referendum is to be held in the country on the 5th regarding further austerity measures; however a refusal of citizens to agree does not necessarily mean exiting the Euro Area. A short rally in assets yesterday swiftly reversed as investors scrambled to the USD, this as unemployment is at 11.1% and the European CPI fell towards deflationary territory – down to 0.2% from 0.3%. The ECB is expected to expand quantitative easing soon as conditions deteriorate.
A weak Yen is encouraging Japanese manufacturers, based on a Bank of Japan Tankan survey released overnight. Large companies are showing growing confidence thanks to improved conditions and strong investment in projected production. The latest manufacturing PMI reading at 50.1, following last month’s contractionary reading is supportive of USDJPY trending higher after several sessions of weakness in the pair. Meanwhile, China is being pressured to introduce QE measures to ease current liquidity pressures. The overnight PMI and HSBC PMI both printed below expectations, confirming a manufacturing downturn, and a soft real economy is expected to lead to continued and possibly swift contraction.
US crude inventories grew by a surprising 1.85 million barrels, after expectations for a 1.3 million barrel withdrawal were beat by a wide margin. The growth is ascribed to record production highs that are expected to grow even more. Major benchmarks fell following yesterday’s report from the American Petroleum Institute, and if storage becomes a factor, they are expected to drop even more. A threat of overcapacity at the Cushing storage facility and others may lead to open market dumping, rather than anticipation of a price reversal. Following the API announcement, both Brent and WTI lost more than $1 per barrel, with today’s spread between the two hitting $4.25 – up from last week’s $3.
AUDUSD Upward Trending Channel Trading Opportunity
After months of downside following the more accommodative policy stance of the RBA under the stewardship of Governor Stevens, the Australian dollar is on the rebound after touching multi-month lows. Aided by stronger economic fundamentals locally despite the downside in the mining sector, the AUDUSD continues to appreciate on the back of a technical rebound from the recent downtrend. The upward trending channel formation that has been setting up since the weekly reopening late Sunday night has a bullish bias. The ideal strategy for playing the equidistant channel involves taking long positions from the lower channel line targeting the upper channel line. Trading against the near-term uptrend is unwise considering the worsening reward potential and increased risks.
Wishing you a successful trading day,
NetoTrade Analysts Team