The agreement between Troika and Greek government caused some optimism that hurt global bonds, though modestly. The Eurogroup poured cold water and formulated some extra conditions. This resulted in a modest risk-off environment this morning. Intra-EMU spreads narrowed a bit further yesterday.
* Currencies: Euro rebound capped by yet another delay on the new Greek rescue package
EUR/USD reached new highs above 1.33 as Greek politicians reached an agreement on austerity measures. However, the rebound of the euro was capped as the Eurogoup failed to rubberstamp the Greek agreement. EUR/GBP is holding close to the 0.8422 resistance as the BoE raised the programme of asset purchases.
The Sunrise Headlines
* US Equities continued to hover sideways on Thursday as the Greek austerity deal failed to convince investors. This morning, Asian shares trade slightly lower after the Eurogroup decided overnight to withhold approval for a second Greek bailout.
* Euro zone Finance Minsters dismissed as incomplete a reputed €3.3 billion package of Greek budget cuts presented to them in the hope of securing a new €130 billion bailout and sent Finance Minister Venizelos back to Athens with a fresh set of demands and an urgent deadline.
* The European Central Bank left its key interest rates unchanged yesterday. While the economic outlook is a little bit less gloomy, the situation in Greece and the danger of a credit crunch remain the focus of the ECB.
* The Bank of England decided yesterday to keep rates unchanged at the current record low level, but voted to increase the programme of asset purchases by £50 billion to a total level of £325 billion, in line with expectations.
* The Chinese trade surplus widened sharply in January as imports sank 15.3%, raising concerns that Lunar New Year factory shutdowns do not fully explain the slump in imports and may instead be evidence of a further faltering in demand.
* Japanese Finance Minister Azumi said this morning that Japan will take decisive action in the currency market if necessary adding that he would not hesitate to conduct solo intervention to counter speculative moves.
* Brent crude oil prices ($118.19) continued their march higher yesterday, nearing important resistance levels.
* Today, the eco calendarcontains the US trade balance and Michigan consumer confidence. Fed Chairman Bernanke Speaks on Housing
Currencies: Euro Rebound Capped By Yet Another Delay On The New Greek Rescue Package
On Thursday, the Greek debt talks and the ECB meeting were the drivers for EUR/USD trading. Greece politicians reached a deal on a second rescue package while the ECB as expected left its policy unchanged. However, the euro failed to profit as the Greek political agreement was not rubber-stamped by Eurogroup Finance Ministers.
Yesterday, the EUR/USD cross rate moved up an down roughly between 1.3235 and 1.3325. Greece was still the dominant force behind the price action. The stop-and-go (or better go-and-stop)
Today, the calendar in Europe is thin with only production and CPI data of the members states on the agenda. In the US, the trade balance and the Michigan consumer confidence will be published. In both cases we put the risk for a slightly weaker than expected figure. The data should only be of intra-day importance. The market talk today will still be on the delay of the new rescue package for Greece. As said, we have the impression that Greece is becoming less important for trading on global markets and thus also for EUR/USD trading. That said, the inability to remove the issue from the table has broken the positive momentum of the recent risk rally. This might hamper further gains of the euro short-term. So, we expect a consolidation of the recent gains or even a very slight correction in the run-up the next meeting on Greece, expected on Wednesday. http://thefasttracktrader.info/
Technical Picture. During the last quarter of 2011, EUR/USD was captured in a standing downtrend which lasted till mid January. The pair dropped below several important support levels, including the key 1.2867 area (Jan 2011 low). Mid January, the decline of the euro slowed. The euro downgrade of S&P caused EUR/USD to set a new reaction low at 1.2624, but a test of the 1.2588 didn't occur. The decline in EUR/USD was exhausted and a technical rebound kicked in. The pair regained the 1.2858/79 area (Previous low/reaction high) and broke out of a downward trend channel. This indicated that the short-term pressure was easing. The pair got a boost from Fed decision and regained a series of key resistance levels (1.3077; 1.3146 and finally also the 1.3197 reaction high). The pair is now clearly above the 1.3146/1.3234 (LT neckline/reaction high) resistance (which was our stop-loss area). The short term picture improved further and suggests that there is room for the upward correction to be extended. The 1.3548 (02 Dec high) is the next target on the charts. In a day-to-day perspective, it looks difficult for EUR/USD to succeed a strong follow-through move higher. http://thefasttracktrader.info/