Asian Session Morning: Draghi Passes the Buck and an RBA Minutes Preview

June 16, 2015

Doing my morning rounds online today, I stumbled across the above Mario Draghi ‘creature’ from a German artist named Emanuel Strixner. I definitely recommend taking a look at some of his work here.

Draghi Gold:
Speaking in Brussels overnight, Mario Draghi has played down the ECB’s role in the Greek debt soap opera, telling an audience that responsibility lies in the hands of politicians and not the central bank.

“It should be absolutely clear that the decision on whether to conclude the review of the current program and disburse further financial support to Greece lies entirely with the Eurogroup, so ultimately with euro-area member states.”

“Hence this is a political decision that will have to be taken by elected policymakers, not by central bankers.”

Interesting stance from Draghi. With the potential impact a Grexit would have on economic growth and confidence in the European Union, I thought he would at least use his position to jawbone towards a solution. I did laugh at his obviously faux confidence here though:

“We know by the word of the Greek leaders that these payments will be met fully and timely. It would be pointless for me to speculate what we would do if payments not met at this stage.”

Well Greek politicians have given markets their word and we all know that politicians never lie… right? Good luck!

Importantly, Draghi also gave reassurances that the ECB had a ‘clear intention’ to continue it’s QE program until at least September 2016. No surprises here so no catalyst for markets to sell off on the back of it. As you were.

EUR/USD Daily:
Click on chart to see a larger view.

The resilience of the pair is really highlighted by the boxed area on the chart above. Sitting at longer term trend line resistance but right in the middle of it’s short term flag, the long wicks show the inability of price to push off resistance at all. In the current European and Fed expectation climate that is strength if ever there was!

Australian Minutes:
EVERYONE expects Stevens and the RBA to come out with dovish Monetary Policy Meeting Minutes. With basically the entire trading universe short and expectations for a ‘sure thing’ further to the downside, watch for a massive upside squeeze if we get anything but the tone of a ground pecking dove.

AUD/USD Daily:
Click on chart to see a larger view.

With no downward momentum on multiple touches of support, I just see this chart as perfectly set up to squeeze any weak shorts before that lower push comes and today’s minutes could be the perfect catalyst for a pre-FOMC squeeze.


On the Calendar Today:
Monetary Policy Meeting Minutes out of Australia this morning in Asia and as I spoke about above, we are at risk of a squeeze. Shorts, proceed with caution if you are holding through this one.

German ZEW is always a market mover for the Euro and could also be the catalyst for another squeeze up out of the EUR/USD daily trend line.

AUD Monetary Policy Meeting Minutes

EUR European Court of Justice Ruling
EUR German ZEW Economic Sentiment
USD Building Permits


Chart of the Day:
With ‘The Beast’ hitting it’s highest price in 6 years overnight, lets bring up a few charts.

GBP/JPY Daily:
Click on chart to see a larger view.

As you can see, price has pushed up off trend line support (after a failed breakout) and onto new highs. The opportunity comes now that price has reached the upper level of a supply zone where sellers are expected to enter the market.

GBP/JPY Weekly:
Click on chart to see a larger view.

If you scroll back on your weekly chart, you can see that the zone price is pushing up into has been active as far back as 2001!

Common sense says to watch for weakness and fade into this zone, but I’ve been looking to fade this pair from 1000 pips below. This is definitely a pair that you have to give a lot of respect to in terms of position sizing and stop placement to trade successfully.

Are you ready for live trading GBP/JPY? Leave a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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