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Euro Ready to Stray from LB

Hourly

Yesterday’s Trading:

Yesterday was anything but simple, but my expectations for the euro and pound rang true. The euro stuck above 1.11 on hearing that Greece declined to pay up the IMF. By the close of trading in the US, the euro/dollar was trading at the LB : 1.1140.

The International Monetary Fund confirmed that Greece did not pay the 1.55 billion euros that it owes and that the fund had received a request to extend the credit payment deadline. Greece now does not have the right to further IMF funds due to it not settling its debt within the deadline.

Greece has proposed that it could conclude a two-year deal with the European Stability Mechanism (ESM) and restructure its debts. The Greek government has promised to use ESM funds only to repay debt.

So has Greece defaulted? The IMF is avoiding the word default and is instead calling it a delay in payment. On 10th July Greece will have to settle further 2 billion euro treasury bill. It’s unlikely they’ll pay up.

Greece has prepared another set of proposals regarding its debt. The Eurogroup president J. Dijsselbloem has announced that any new proposal by the Greeks will be considered by the Eurozone finance minister on 1st July.

The euro is fluctuating in a wide range. But why isn't it falling? Traders are gearing up for a situation where the Fed will put off an interest rate rise if the Greek situation has a negative effect on the US economy.

The market is ignoring the macroeconomic data. The US consumer confidence index for June was 101.4 (forecasted: 97.5, previous: reassessed from 95.4 to 94.6).

The June index for US business activity from the Association of Managers in Chicago was 49.4 (forecasted: 50.3, previous: 46.2).

Main news of the day:

  • At 10:50 EET, France – June PMI for the manufacturing sector;
  • At 10:55 EET, Germany – June PMI for the manufacturing sector;
  • At 11:00 EET, Eurozone – June PMI for the manufacturing sector;
  • At 11:30 EET, UK – June PMI for the manufacturing sector;
  • At 12:30 EET, Bank of England’s financial stability report;
  • At 15:15 EET, US - June publication of changes in employment figures from the ADP;
  • At 16:45 EET, US - June PMI for the manufacturing sector;
  • At 17:00 EET, US - June ISM manufacturing index.

Market Expectations:

Today PMIs for the manufacturing sector are out. Greece has tired everyone out, so I’m starting to consider the market is readying for the payrolls. Due to a US national holiday, the payrolls will be on Thursday.

Technical Analysis:

  • Intraday target: maximum: 1.1175 (in Europe), minimum: 1.1075 (on American session), close: in the region of 1.1110;
  • Intraday volatility for last 10 weeks: 137 points.

The euro/dollar is trading at the LB line. With this pattern the euro could drop immediately, but I'm looking at a fall via a rebound to 1.1175. I don’t see the euro growing against the USD or other currencies with the current Greek situation.

Conclusion:

Greece overran the IMF payment and now doesn't have access to further funds. On Thursday the USA is publishing a labor market report. For now, everyone is forgetting about Greece until Monday. When the referendum has been held, Greece will once again be in the focus. According to the forecast, I’m expecting a fall to 1.1075 and a close in the region of 1.1110.

GBP/USD Hourly Graph

Daily

On Tuesday the euro/dollar closed down by the LB line. I don't see anything interesting at the moment that could be the key for understanding the direction of the euro. Now to the Weekly tab.

GBP/USD Daily Graph

Weekly

The sellers partially won back losses, but the situation is still uncertain. Greece won’t pay, nor is it agreeing to creditor demands, meanwhile the euro isn’t falling. All that’s left is to wait for the referendum and a solution to the Greek situation.

GBP/USD Weekly Graph

01 July, 08:20 (GMT+3)
Pound Target: 1.5645

Attention:

Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.

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