Asian Session Morning: The Long Greek Road to Nowhere

June 2, 2015

The Road to Nowhere:
This morning we woke to news of key stakeholders from the ECB, IMF, France and Germany meeting in Berlin to try to come to a solution on Greece. When the Europeans are heading into ’emergency meetings’ when Asian traders are just waking up, you know things are getting dire.

Interestingly, neither Varoufakis nor Tsipras were invited to attend the meeting which sparked speculation over whether they had already submitted their final answer and that a solution from these talks was merely a formality.

Reuters:
01-Jun-2015 23:25:10:

GERMAN GOVT SPOKESMAN – MERKEL, HOLLANDE, JUNCKER, LAGARDE AND DRAGHI AGREED ON NEED FOR INTENSIVE WORK ON GREECE

01-Jun-2015 23:26:06:

GERMAN GOVT SPOKESMAN -PARTICIPANTS AT TALKS WILL REMAIN IN CLOSE CONTACT IN COMING DAYS, INCLUDING WITH GREEK GOVT

However, as you can see from the Reuters terminal updates that flashed through, this was not the case. A “step up in intensity” sounds to me like an emotional football player rattling off pre-written cliches during a post match press conference for a match they got beaten in.

What an absolute let down.

EUR/USD Hourly:
eu1
Click on chart to see a larger view.

The Euro hasn’t reacted to the headlines with markets becoming de-sensitised to failure. From a technical point of view, I’m now looking for the down-trend to resume from here and new swing lows to be printed.

Elsewhere:
Sneaking under the radar a little this morning was last night’s solid May US ISM print. The 52.8 number v the expected 51.9 again helped to highlight the Fed’s stance that the the US economy is actually as strong as they have been expecting and that hikes sooner rather than later are on the cards.

USD strength after the release caused the majors to fall but as you can see from the EUR/USD chart above, after the bearish hourly candle, price has retraced over half the move. Now any Greek optimism is out of the way, for me this adds to the case to be short EUR/USD.

———-

On the FX Calendar Today:
This afternoon in Australia we get the RBA’s June decision on Monetary Policy. The RBA is expected to keep rates on hold, but for traders it’s all about the wording in the statement of where the bank’s bias lies for the future.

After a poor run of data and AUD/USD at current prices, markets are expecting some sort of easing bias to be inserted into the statement. If this doesn’t materialise then expect the Aussie to rip higher from current prices.

Tuesday:
AUD Cash Rate
AUD RBA Rate Statement

GBP Construction PMI

———-

Chart of the Day:
AUD/USD Daily:
au1
Click on chart to see a larger view.

With the Aussie dollar sitting just above its lows, I don’t like the risk:reward on offter by holding short into the RBA decision this afternoon. With markets expecting some sort of easing bias to be implicitly stated, anything else will see a rip higher. With buyers already waiting at current levels, I see the major risk here as a huge move to the upside.

Of course Stevens will also realise market expectations and want to cap the AUD at the lowest level he can, but he also doesn’t have to include the key sentence in his statement to get his point across. This could possibly see price rally after the release, but be talked down gradually throughout the month.

Something to think about.

Let us know how you’re managing your AUD exposure heading into the RBA? Leave a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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