Morning Report: Greece Takes Centre Stage (…Again)

KEY DATA RELEASES TODAY (GMT) :

0900 EUR Flash Services PMI exp53.2 v 52.3
0900 EUR Flash Manufacturing PMI exp 51.6 v 51.0
0930 GBP Public Sector Net Borrowing exp -9.5B v 12.5B
0930 GBP Retail Sales m/m exp -0.1% v 0.4%
1015 EUR Eurogroup Meetings
1445 USD Flash Manufacturing PMI exp 53.7 v 53.7

OVERNIGHT:

Eurozone finance ministers will hold a special meeting Friday to decide on a Greek request for a six-month loan extension. The meeting will take place at the usual time (14:00 London time/9:00 EST).Convening a meeting does not automatically imply an extension can be agreed Friday as the situation remains fluid but at this point markets believe it quite likely that an interim deal could be achieved, although there are still material risks that there will not be an agreement.

Reports that Greece had requested an extension of its “master financial facility agreement” helped fuel a rally in EURUSD towards 1.1450 early Thursday, but the pair has since fell back towards the lower end of the range on the back of Germany’s finance ministry stating that Greece’s proposal is too open-ended it called it a “Trojan horse.” Other European officials, including Greek officials, have been more positive about Friday’s meetings. Tricky trading conditions today as headline risk will likely drive short term flows, with many participants paring risk ahead of a definitive resolution to the ongoing discussions.

The USD recovered some post-FOMC losses. This bias was influenced by positioning, slightly upbeat data, and a heavily circulated adviser note which concluded that senior leaders at the Fed are more hawkish than the January minutes suggest and this should become apparent at Chairwoman Yellen’s testimony on Tuesday. USDJPY is back around 119.00 after highs near 119.20.119.40 first level of resistance followed by 120.00, the big level above is at 120.50 and a breach here is what would likely get the market involved in a meaningful way. GBPUSD held up well through yesterday and remains supported above the 1.54 handle currently GBP trading with a quasi safe haven status as it is seen as the most likely candidate to follow the the FED’s normalisation route later this year. While above 1.5350 the risk remains for a challenge of offers in the 1.55 area.

Looking ahead besides the obvious headline risk with today’s Eurozone Finance Ministers meeting, we also get a raft of PMI readings in the European session along with UK retail sales and Public Finances data. In the US session we get CPI and Manufacturing PMI.

PRICE ACTION OVERVIEW:

EUR: While 1.1270 supports focus on 1.17 upside corrective equality target, below 1.12 targets 1.10
GBP: 1.5330 supports for correction targeting 1.55/5550
JPY:  Anticipated final corrective phase in broader bullish consolidation while 117.50 supports expect break of 120.50
CAD: Bullish consolidation continues to develop while 1.2350 trendline supports 1.28 next upside objective ahead of 1.30 key resistance
AUD:  0.79 remains the key hurdle to further corrective upside objective of .8050.

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutralAwait new signal
GBPUSDBullishBuy/18th Feb1.5386OPEN1.5236
USDJPYNeutral Await new signal
USDCADBullish Buy/19th Feb1.2485 1.301.2335
AUDUSDNeutralBuy/ 16Feb 0.78 0.8050 0.77Counter-trend

ANALYSIS:

EURUSD Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • **HEADLINE RISK TODAY** range contracts while 1.1270 holds as support the EURUSD is on track to test a daily corrective equality target at 1.17, below 1.12 suggest early resumption of downtrend
  • Order Flow indicators; OBV consolidates at  lows, Linear Regression and Psychology bearish
  • Monitor price action at 1.16/17 or a break of 1.12 to reset short positions to target 1.10

eu2015-02-20 07_01_34-

GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 WeeksBearish

  • Trading with a bid tone above 1.54 while 1.5350 supports expect test of 1.55/5550 if this caps upside there is potential for downtrend to resume, above 1.5550 targets 1.58 next
  • Order Flow indicators; OBV drifting up from lows, Linear Regression bearish attempting to recapture midpoint form below, Psychology pierces midpoint form above.
  • Risk free longs in play, monitoring price action and Order Flow indicators in the 1.55/5550 area to reverse short

gu2015-02-20 07_10_48-

USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish

  • 118 acts as base for now for potential resumption of uptrend, over 119.40 targets 120.40 next, only a break of 117.50 would raise concern for the bullish bias
  • Order Flow indicators; OBV testing recent consolidation lows, Linear Regression regains midpoint form below, Psychology bearish but ticking up to test midpoint from below
  • Monitoring price action and Order Flow indicators to set longs to target 2014 highs

uj2015-02-20 07_13_57-

USDCAD: Short Term (1-3 Days): Neutral  – Medium Term (1-3 Weeks) Bullish

  • 1.2350 attracts buyers and supports expect retest and break of 1.28 on route to key 1.30 resistance.
  • Daily Order Flow indicators; OBV just off highs, Linear Regression and Psychology bullish
  • Long in play, please see key trades for details

uc2015-02-20 08_23_15-

AUDUSDShort Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • .79 the key upside hurdle to further corrective upside below .77 threatens retest and potential break of lows for early trend resumption targeting .75 next
  • Order Flow indicators; OBV consolidating above recent lows, Linear Regression and Psychology bearish
  • Longs in play will look to reverse at corrective targets to rejoin broader trend, please see key trades for details

au2015-02-20 08_24_43-

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