No New Offers From Either Side to Ease Conditions
European creditors remain steadfast in their refusal to restructure Greece’s existing debt, banks remain closed and the appointment of a new finance minister has failed to curb German Chancellor Angela Merkel’s venom as she swore there would be neither debt relief nor a ‘haircut’ for the intransigent Greeks. Discrepancies are beginning to appear within the rhetoric, with EU President Jean Claude Juncker naming Monday as the deadline for a Greek response. However, the confusion does not bode well for Greece, which is expected by most analysts at this point to exit the Union within a very short time, nor for Europe, confidence in whose leaders is being lost by investors quite swiftly.
Chinese regulators have halted trading in over 50% of regions shares following an overnight plunge in prices. The Shanghai Composite dropped by more than 8%, not witnessing this manner of an intraday drop since 2007. It later recovered slightly, but not before new policies were instated by the Government censor who is forbidding journalists from using words like ‘rescue’, ‘plunge’ and others that indicate a continued decline in equities. In an attempt to defuse the bubble, Chinese policymakers are easing certain requirements; however this has not abated investor panic, and the deleveraging of the real and financial economies are expected to result in rising margin calls and tumbling commodity values. The contagion has begun already, with markets in Hong Kong showing infection.
A nuclear deal between Iran and the rest of the world seems to be further away, as negotiating parties struggle to fill gaps in positions. In spite of the rhetoric, optimism still reigns in spite of no evident progress, ignored red lines and previously missed deadlines. Iran seems to hope that the fact of negotiations will suffice to have sanctions lifted, the country’s entry into a saturated oil market would probably mean little additional income, especially following yesterday’s resumption of downtrends retesting January lows. Increased output from Iran would likely only exacerbate the recent drop, with a million barrels in production expected to be added from any sanctions relief.
EURUSD Downward Trending Channel Trading Opportunity
Increasing rhetoric from key Euro Area policymakers has set the stage for a Greek exit and further contagion as peripheral bonds sell off and traders reexamine the possibility of a breakup. The lack of creditor flexibility remains apparent after both sides blamed the other for yesterday’s collapse in talks. Europe’s increasingly onerous demands of Greece have seen the foundations of the Euro become shakier, with volatility in the EURUSD pair on the uptick. EURUSD has been trending in a downward trending equidistant channel for nearly two weeks as questions about the potential contagion remain unanswered. The channel has a bearish bias with short positions ideally taken from the upper channel line targeting the lower channel line. Fighting the trend with long positions is not suggested due to the increasing risk and narrowing reward potential.
Wishing you a successful trading day,
NetoTrade Analysts Team