EUR/USD worked its’ way ever so slowly higher during the Asian session to 1.3666 as a ‘risk on’ move developed after reports from Singapore about tightening monetary policy by effectively revaluing the Sing Dollar around 1.4%. Talk of massive stops above 1.3700 combined with Moodys comments that Greece’s chance of a rating cut is now greater than 50% also played a role in bringing a halt to the modest rally. Moody also followed those comments up with Greek default risk as a low probability event. That said the Greek stock market is down another 4% today and thus a rally looks to be out of the picture for today. One other development that casts its shadow over today’s trading are reports from the EU that Portuguese growth may be lower than expected and that they need to boost competitiveness and productivity. Another kick in the pants for yet another euro zone country.
Some good news out of the Euro zone today was Industrial Output data, which was better than expected but the EUR/USD did not react to the data due to reasons mentioned above. The market is truly divided this week over Greece, with some thinking that the Greece problem can be put on the backburner for a little while others continue to remain very skeptical indeed. Euro skeptics rule in London but in other timezones we’ve witnessed some decent rallies. Many are continuing to call for an expected rally up into the 1.3900′s, yet the market remains predominately short. The gap created after the Greece loan deal that I mentioned in my last post continues to remain open and thus makes me wonder if we were truly going to see renewed selling pressure then I would have expected to have seen it by now. I believe you can just consider the gap closed at this point.
The dollar continues to strengthen as we have four S&P companies reporting earnings including JPMorgan whose shares were up 2% in pre-market trading following the release of their Q1 results – net income of $3.8bln or 74 cents a share on revenue of $28bln. Fed Chairman Bernanke will be speaking at 10:00 am, I would expect Mr Bernanke to remain dovish as usual. Also out of the U.S. this morning:
US retail sales rose to 1.6%
CPI was up 0.1%
Core CPI was flat.
Core retail sales (ex-autos, gas, and building materials) rose 0.5%
So far, this month’s data shows strong growth with low inflation and stock markets up because of it. It continues to be a difficult task to predict where things are headed fundamentally, and therefore you should continue to stick to your technical analysis in the days ahead. Good luck to you all!
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