2015 ~ Forex Watcher

Monday, June 22, 2015

Gold – Evening Star Forming as Resistance Holds

Golds rally on Thursday on the back of a weaker dollar looked like it could be enough to take it through the double bottom neckline, which could have projected it towards $1,226.50, as noted last week (Gold – Double Bottom Forms on Dollar Weakness).

Gold daily

A failure to significantly break through the neckline though, a level which coincided with a recent area of support and resistance, was followed by a day of indecision and a very bearish looking session today.

Assuming we don’t see a strong recovery in the yellow metal, with it closing back above $1,993.71, the resulting formation will be an evening star, a strong bearish setup. The fact that it has formed on a resistance level is another strong signal.

If we can see a break below the bottom of the flag now, it would strongly suggest the bullish resistance that drove the rally on Wednesday and Thursday has been severely weakened.

If this happens, based on how it’s traded in the past, it may run into strong support in the $1,162-1,170 region. Below here, $1,131.50-1,142.75 may offer further significant support having done so on each of the three times it’s been tested recently. A break below here would put Gold at its lowest level since April 2010.

Slovak PM Says Keeping Greece in EU is Better Option

Slovak Prime Minister Robert Fico said on Monday he believed it was better to keep Greece in the euro zone than it was to let it fall out.

“I believe that, at the end of the day, at least politically we will come to a conclusion that Greece remaining in the euro zone has more advantages at this moment than disadvantages,” Fico said. Slovakia’s position on Greece has been that it wanted to see Greece stay in the euro zone, but not at any cost.

Euro zone officials welcomed Greek concessions on Monday as a possible step towards a deal on averting a default, but politicians dismissed expectations of a breakthrough at a leaders’ summit later in the day to secure the country’s future in the euro. (Reporting by Tatiana Jancarikova; Writing by Jason Hovet; Editing by Larry King)

via Reuters

FTSE Higher on Greek Debt and M&A

Hopes of a deal to solve Greece’s financial crisis and a spate of takeover talk have between them helped lift markets from their recent doldrums.

The FTSE 100 is currently up 80.46 points at 6790.9, although off its best levels on talk that Greece had last night submitted the wrong document to its eurozone partners. The original document had apparently gone some way to breaking the deadlock between Greece and its creditors, so a hitch of this nature has revived the doubts about whether a deal will actually be done.

Meanwhile Sky has jumped 44p or 4% to 10.82 following a Sunday Telegraph report that the Murdoch family had turned down offers from Vivendi and Vodafone for their stake in the business. The Murdochs apparently wanted 18 a share for their 39% in the satellite broadcaster, which appears to have been a sticking point.

Analysts at Liberum said a deal might still happen given the issue seemed mainly about price, but despite reports Murdoch’s Fox might decide to make a bid itself, Liberum believed this seemed less likely:

(1) Both [bidders] seem credible…although there are limited synergies trans-borders for pay-tv (Vivendi has Canal+, the main French pay-tv operator) and it makes more strategic sense for Vodafone to own Virgin Media as it gives its own broadband infrastructure.

(2) the fact that the talks reportedly broke down over price rather than the principle of selling the stake suggests the Murdochs are open to a deal.

(3) it suggests a bid by Fox for the rest of Sky is less likely – it would be hard for Fox to argue that Vivendi should pay 18 a share for Sky without offering a similar amount to other shareholders, and we do not see Fox doing this.

via The Guardian

BOJ Warns Factory Output Lower in Q2

The Bank of Japan said it expects factory output to fall for the first time in three quarters in April-June on weak Asian demand, underscoring the fragile nature of the economic recovery.

Industrial production rose 1.5 percent in January-March from the previous quarter, helping the world’s third largest economy expand much faster than expected.

But the central bank offered a cautious view on the outlook for output, saying it may have briefly hit a soft patch as automakers see domestic inventories build up and steelmakers feel the pinch from sluggish Asian demand.

Industrial production will increase moderately reflecting domestic and overseas demand, albeit with some fluctuations,” the BOJ said in a monthly economic report released on Monday.

The central bank also warned there was “high uncertainty” on its forecast that output will rebound in the third quarter.

via Reuters

BOJ Kuroda Says CB Has Means to Reach 2% Target

Bank of Japan Governor Haruhiko Kuroda said on Monday the central bank has ample means to achieve its goal of accelerating inflation to 2 percent and keeping it there in a stable manner.

Speaking in parliament, Kuroda said raising the 0.1 percent interest the BOJ pays on excess reserves parked with the central bank could be one option if the BOJ were to exit its massive stimulus program.

But he stressed that it was premature to debate a specific exit strategy now because how best to end the stimulus program depends on economic and financial developments at the time.

via Reuters

Gold Falls as USD Rises and Greece in Focus

Gold eased on Monday as the dollar rose and as European equities jumped on possible signs of progress in Greek debt talks, which curbed safe-haven demand for the metal.

Spot gold had slipped 0.6 percent to $1,192.01 an ounce, about 1 percent below its highest level since May 26 at $1,205.50 hit last week after a dovish Federal Reserve message on the timing of a U.S. interest rate rise.

U.S. gold futures for August delivery were down $9.90 at $1,192.00 an ounce.

Gold is typically regarded as a good bet in times of financial and economic uncertainty, but traders have seen modest demand over the past few days from investors concerned about the Greek debt crisis.

“It is difficult to call on Greece, we haven’t seen much buying above $1,200 and wider financial markets are hopeful that there will be a last-minute solution that will avoid a Greek default,” Societe Generale analyst Robin Bhar said.

via CNBC

Oil Above $60 as Greek Hope Rises

Oil prices rose in early European trading Monday as investors grew optimistic over Greek debt negotiations, though persistent oversupply worries remained a factor for oil markets.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in July CLN5, -0.45% moved above $60 a barrel, up 60 cents or 1%. August Brent crude on London’s ICE Futures exchange LCOQ5, -0.27% was up 45 cents, or 0.7%, to $63.47 a barrel.

Eurozone leaders will try to reach an agreement on Greece’s bailout at an emergency meeting today. Failure to reach an agreement could put Greece on the road to bankruptcy and exit from the euro, officials have warned in recent days. Any major currency swings as a fallout of the debt talks would impact commodities prices, including oil.

Meanwhile, excess oil production continues to pressure oil prices.

The Atlantic Basin remains flush with unsold oil cargoes despite strong summer demand, resulting in some of the weakest prices in years, which is a worrying sign for the market in the fall season, Morgan Stanley’s Adam Longson said in a report.

Around 10 million barrels of mostly Nigerian crude and crude of other similar grades is lingering offshore West Africa, he said. “Some cargoes are taking more than 3 months to find buyers, and current loading programs are not selling well,” Longson added.

Market observers are also keeping an eye on when U.S. oil production will show signs of significant declines due to low oil prices. The U.S. oil-rig count fell by four to 631 in the latest week, according to Baker Hughes Inc., marking the 28th straight week of declines.

via MarketWatch

Global Stocks Rise on Greek Deal Optimism

Stock markets have risen on the hope that a deal may finally be agreed between Greece and its creditors, after Athens submitted fresh proposals to try and avoid defaulting on its debts.
Paris and Frankfurt markets were up 3%, while London’s FTSE 100 was 1.4% higher. Japan’s Nikkei closed up 1.3%.

Greek PM Alexis Tsipras is meeting with his country’s creditors later.
If a deal is not agreed, Greece risks defaulting on a €1.6bn (1.1bn) loan repayment due at the end of June.

The proposals submitted by Athens have been received positively by its creditors – the International Monetary Fund, the European Central Bank and the European Commission (EC) – and by its eurozone partners.

“I see the work that has been done,” said French Finance Minister Michel Sapin. “It is quality work.”
He added: “A deal requires both sides to evolve. This work is underway and is being undertaken in good conditions.”

Earlier, a representative of the EC said the proposals represented a “good basis for progress”.

via BBC

EUR in No Man’s Land: Jaded Traders Headline Watching

EUR ping pong price action expected by jaded traders

Greece delivers: Is it enough?

EZ/EU Officials see deal unlikely today

Greek investors optimistic: stocks up, spreads tighter

Greece has followed through on demands by EU officials and delivered new proposals ahead of todays supposedly ‘make or break’ Euro emergency summit. The market is getting mixed messages on whether there will be a Greek solution found later this afternoon.

European Commission President Juncker say’s he does not know if there will be one, while EU Economic Commissioner Pierre Moscovici said he was “convinced” that eurozone leaders holding an emergency meeting in Brussels would find a way out of the Greek crisis. The talks will start in a couple of hours and are expected to go well into the night. It does seem that the new proposals may be well received and there could be an eleventh hour deal in the works. However, asset prices will obviously be susceptible to Greek headlines. Investors should be preparing for ‘ping-pong’ price action.

Earlier this morning the ECB supposedly approved additional liquidity to keep Greece’s financial wheels greased. It is the third time that the ECB has upped the Bank of Greece’s ELA over the past six-days. This had been necessary as today’s Greek banking sector pre-order withdrawals of cash was said to be over +€1.0b. Last week over +€4.2b was drained from deposit accounts.

EUR is neutral territory

The single unit has now returned to trading in neutral territory, the mid-point from last Friday’s and the overnight range (€1.1340-50), and this after having filled in the gap from the Asian session (€1.1404 high overnight).

For the majority of traders and speculators, the risk/reward still favors buying EUR’s on dips. However, no matter what the spin-doctors are saying ahead of today’s summit, the Greek Prime Minister is still looking for an agreement without VAT hikes. The unpredictability will lead to more anxious moments for investors and traders who have been forced to watch headlines. Any mention of Grexit will have traders nervously scuttling for the exits.

On the flip side, Greek investors certainly seem optimistic over the ongoing negotiations between their Prime Minister Tsipras and the country’s creditors. In the bond market, Greek/German spreads have tightened significantly this morning. Greek 10-year debt (+11.30%) is about -145bps tighter to the German 10-year Bund (+0.81%) as the market heads stateside. However, perhaps more significant is that two-year Greek paper (+25.23%) is a stunning -370bps tighter to the German Schatz (-0.184%: two-year debt issued by the German Federal Government). Obviously poor liquidity is contributing to some of the price action along with the uncertainty over what the Greek proposals actually are.

Supposedly, the reforms are to gradually raise retirement age to 67. Greek officials have offered to have +23% as main VAT, +13% for energy and basic food and +6% for medicine/ books.

Do not be surprised that Euro officials will not be able to formulate a common stance as early as this evening. If there is progress today, the market should be interpreting this as a deal to be confirmed over the next few days. Any progress in talks will have Greece pushing away from a potential default scenario.

Forex heatmap

ECB Provides More Funds for Greek Banks

The European Central Bank raised the ceiling on emergency liquidity Greek banks can draw from the country’s central bank for a third time in six days, a banking source told Reuters on Monday, declining to say by how much.

The ECB’s governing council held a teleconference on Monday to discuss extending the emergency liquidity assistance after Greek savers pulled about 4.2 billion euros from Greek lenders last week on fears Athens may fail to reach a deal with lenders.

“The governing council raised the ELA cap and will convene again via teleconference at any time necessary,” the source said, speaking on condition of anonymity.

The ECB raised the ELA ceiling by 1.1 billion euros to 84.1 billion euros on June 17. It raised it by a further 1.8 billion euros on Friday, according to a government official.

Sources in Frankfurt and in Brussels said pre-orders for deposit withdrawals for Monday had already reached 1 billion euros – after savers pulled over 4 billion euros out of their banks last week.

Reuters

Asian Equities Rise Before Greece Talks

Asian stocks rose ahead of Monday’s European emergency summit on Greece’s debt crisis. The MSCI Asia Pacific Index added 0.3 percent to 147.66 as of 9:06 a.m. in Tokyo after sliding 0.7 percent last week. E-mini futures on the Standard & Poor’s 500 Index jumped 0.4 percent ahead of the meeting, which is seen as a last-ditch attempt for Greece and its creditors to devise a bailout deal.

“The U.S. market seems to be reacting somewhat positively to the new Greek proposals,” Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo said by phone. “Deadlines may be extended in order to discuss the new proposal, but it doesn’t appear to be ground-breaking.”

With the clock running down on a June 30 deadline to make payments and work out a new deal after months of fruitless negotiations, Greek Prime Minister Alexis Tsipras will have to convince the country’s creditors that he’s ready to compromise on election promises to avoid a default. In phone calls Sunday, he briefed German Chancellor Angela Merkel, French President Francois Hollande and European Union Commission President Jean-Claude Juncker on Greece’s proposal to unlock bailout funds, according to a separate statement from his office.

Bloomberg

D-Day For Greece as ECB Considers ELA Eligability

Once again, all eyes will be on Greece on Monday and whether it can come to an agreement with its creditors and avoid a default and possible messy exit from the eurozone.

Greek Prime Minister Alexis Tsipras put forward new proposals on Sunday which he hopes will convince the institutions to release the €7.2 billion that was agreed back in February. It’s unlikely to be as simple as that, as it never is with Greece, but already the proposal has been labelled a “good basis for progress”, which offers some hope.

Negotiators from both sides have a lot to lose going into what could be the final day of negotiations. A large rally in Greece demanding Tsipras remain firm with the county’s credits sent another strong message that the public have had enough after years of painful austerity that has shrunk output by around a quarter and driven unemployment up to outrageous levels. Equally, German Chancellor Angela Merkel is under a lot of pressure not to bow to Greek demands and set a bad precedent for any other countries that run into financial difficulty. It seems unlikely that in the event of a deal, both sides will come out of this in good condition.

The main pressure on Greece to get a deal done isn’t necessarily coming from the International Monetary Fund repayment due in eight days as a default is extremely undesirable but not a complete disaster, it’s coming from what’s happening with the country’s banks. Withdrawals have ramped up significantly, with more the €4 billion being withdraw in the last week alone (compared to €200-300 million per day on average previously). Another €1 billion has apparently already been lined up for withdrawal for today as many people believe that Greek banks would close in the absence of a deal at today’s emergence EU summit.

The only reason Greek banks are still opening is because of the European Central Banks’ emergency liquidity assistance (ELA) program which has been providing banks with loans in exchange for collateral. The ECB can only continue to offer these loans as long as Greek banks remain solvent, something that will not be the case much longer if this pace of withdrawals continues. In fact, some would argue that the ECB has already overstepped the mark in an effort to try and buy time for a deal to be done, which is outside of its mandate.

On Friday, the ECB agreed to extend the funding to Greek banks until today, when it is due to have another teleconference to discuss it. If the ECB cuts off Greek banks, they would be forced to close while capital controls are put in place to prevent an even greater run on the banks than we’ve already seen. The chain of events that would follow could lead to Greece leaving the eurozone and re-introducing the Drachma. It truly is a massive day for Greece’s future. The time of hard negotiating is over, leaders from both sides need to strike a deal and avert disaster.

Investors appear to be at least a little optimistic that this can be achieved. Index futures are a little higher ahead of the open, while the euro has had a decent start to the week. While these talks do feel different to the past, what we have learned is that an 11th hour deal always follows weeks and months of discussions. We can only hope the same happens again today.

Aside from Greece, the day is looking rather quiet. There is no notable European data due out and the only U.S. release will be existing home sales. This leaves all eyes firmly on the negotiations and whatever comments we get throughout the day. I expect a lot of volatility in response to any comments or rumours that are likely to be coming thick and fast throughout the day.

The FTSE is expected to open 18 points higher, the CAC 16 points higher and the DAX 73 points higher.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

European Stocks Expected Higher Ahead of Talks

European equities are expected to open lower higher Monday ahead of crucial meetings of euro zone leaders and finance ministers to discuss a new reforms offered by Greece to its creditors.

The FTSE is seen opening up 8 points at 6,718, the German DAX 74 points higher at 11,114 and the French CAC up 19 points at 4,834. Asian equities were mostly higher early Monday and European stocks looked set to follow suit as investors hoped a compromise could be found in Greece’s debt talks with its creditors.

On Sunday, Greek Prime Minister Alexis Tsipras presented a new reforms package to its international creditors, in what appears to be a last-ditch effort to avoid a debt default. Greece must pay the International Monetary Fund, of the country’s senior creditors, a repayment of 1.5 billion euros on June 30.

CNBC

Opinion: Europe Can Benefit after Greece Drama

Europe’s investment potential could explode once the Greek drama is over, according to one of Wall Street’s largest asset managers.

“The underlying fundamentals in many places in Europe are quite sound, but [the Greece issue] detracts focus from that,” said Sheila Patel, CEO of International Goldman Sachs Asset Management (GSAM), a firm that manages $1.2 trillion globally.

“We’ve seen some strength in peripheries like Spain and Italy but when you see [Greece] going on, can we convince investors to move ahead? I’d say they are still hanging … For every five investors we get to take a look at Europe, only one invests,” she told CNBC on Monday.

CNBC

Fortunes of China’s Stocks May Lead to Further Easing

The plunge in China’s stock market – which suffered its worst weekly drop last week since 2008 – has helped fuel already-heightened expectations mainland authorities will launch fresh monetary stimulus in the near future.

The benchmark Shanghai Composite index plunged 13.3 percent last week, entering into correction territory, precipitated by concerns over rising valuations and tighter liquidity in the market.

“Insufficient open market operation liquidity injections and a coincidental surge of IPOs [initial public offerings] in the A-share market shook Chinese stocks,” said Steve Wang, chief China economist at Reorient Research.

CNBC

Asian Equities Higher Ahead of Greece Talks

Asian equities were mostly higher on Monday, together with firmer U.S. stock futures and the euro, as investors were encouraged by signs of a compromise in Greece’s debt talks with its creditors.

After anxious depositors pulled billions of euros out of Greek banks last week, Greek Prime Minister Alexis Tsipras made a new offer of reforms on Sunday, showing a fresh willingness to make concessions that could unlock frozen aid and avert a default on the country’s debts. Both sides are due to continue the negotiations at a crisis summit in Brussels this week.

“S&P futures have opened on a stronger note… So far, we have heard constructive narrative of a new Greek proposal, with a number of new measures being effectively leaked through various newswires. We have even heard from the French camp that the proposal may form the basis of an agreement which the EU finance ministers can accept and use in the upcoming head of state summit,” Chris Weston, IG’s chief market strategist, wrote in a note.

CNBC

Gold Drifts Below $1200 as Greece Eyed

Gold held close to its highest in nearly four weeks on Monday after climbing last week on hopes a U.S. interest rate hike may not come as soon as some had expected, but gains were curbed by possible signs of progress in Greek debt talks.

Spot gold had dipped 0.1 percent to $1,198.31 an ounce by 0043 GMT, near the $1,205.50 hit last week, which was its highest since May 26.

Gold rallied last week on a softer dollar after Federal Reserve policymakers said a rate increase would be appropriate only after further improvement in the labor market and greater confidence that inflation would rise.

CNBC

West TX Oil up to $59.40 Despite Oil Glut

U.S. crude futures fell towards $59 a barrel in early Asian trade on Monday as a slower decline in the number of U.S. rigs added to concerns of an oil glut, while worries over the Greek financial crisis dampened market sentiment.

Front month U.S. crude fell 22 cents to $59.39 a barrel as of 0021 GMT after dropping 84 cents in the previous session. Brent for August delivery dropped 25 cents to $62.77 a barrel after closing the previous session $1.24 down.

U.S. oil producers added a rig each in the Permian and Bakken shale basins last week, fueling worries over high domestic oil output, even as the number of active U.S. rigs fell last week, data on Friday showed.

CNBC

Asian Equities Enjoying Greece Talk Plan

Asian shares got the week off to a strong start and U.S. stock futures and the euro firmed on Monday, after Greece scrambled to avert defaulting on its debt with last-minute proposals aimed at appeasing its creditors. Financial spreadbetters expected the mood to carry over into early European trading, with Britain’s FTSE 100 .FTSE seen opening up as much as 0.2 percent, Germany’s DAX .GDAXI 0.7 percent and France’s CAC 40 .FCHI 0.4 percent.

“European equities are set to get a pop higher on the open as traders cautiously welcome developments in Greece,” Jonathan Sudaria, a dealer at Capital Spreads, said in a note. Many investors were still cautious about Prime Minister Alexis Tsipras’ proposals because it was not immediately clear how far they yielded to creditors’ demands for additional spending cuts and tax hikes, nor whether creditors can stomach the offer.

The chief-of-staff to European Commission President Jean-Claude Juncker sent a tweet calling the latest proposal from Greece to resolve its debt crisis a “good basis for progress” in talks at an emergency euro zone summit meeting later on Monday. “Today will supposedly be the last round of negotiations, so there could be a possible surprise in the form of an agreement with both parties seeing the writing on the wall,” said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

Reuters

EU Welcomes New Greece Proposals

The European Union welcomed new proposals from Greek Prime Minister Alexis Tsipras as a “good basis for progress” at talks on Monday where creditors want 11th-hour concessions to haul Athens back from the brink of bankruptcy. EU chief executive Jean-Claude Juncker’s chief-of-staff spoke of a “forceps delivery” as officials worked late into the night to produce a deal ahead of a summit of euro zone leaders in Brussels that they hope can keep Greece in the currency bloc.

Giving no detail of a proposal he said was also received by the European Central Bank and International Monetary Fund, German EU official Martin Selmayr tweeted: “Good basis for progress at … Euro Summit. In German: ‘eine Zangengeburt’.” After four months of wrangling and with anxious depositors pulling billions of euros out of Greek banks, Tsipras’s leftist government showed a new willingness at the weekend to make concessions that would unlock frozen aid to avert default.

It was not immediately clear how far the new proposal yielded to creditors’ demands for additional spending cuts and tax hikes, but the offer was a ray of hope that a last-minute deal may yet be wrangled before Athens runs out of cash. Tsipras spent much of Sunday holed up in a marathon cabinet meeting and discussed the new offer with the leaders of Germany, France and the European Commission by phone.

Reuters

U.S. Investment by Chinese Companies Surges

Surging investment by Chinese companies in U.S. research labs is yielding a fast-growing trove of patents, part of a push to mine America for ideas to help China shift from being the world’s factory floor to a driver of innovation. Largely absent from American research hubs a decade ago, Chinese firms including Huawei Technologies HWT.UL and ZTE Corp (000063.SZ) are now using U.S. researchers to create patents ranging from new software to internet infrastructure, according to an analysis of Thomson Reuters’ global intellectual property database.

The rapid growth in China’s U.S. investments will be a key topic at economic and security talks on Tuesday and Wednesday between top U.S. and Chinese officials in Washington. They are negotiating a bilateral investment treaty that could deepen ties between the world’s two largest economies even amid tensions over China’s military assertiveness.

Even without a treaty, China is pouring capital into U.S. research as well as buying other assets. While its firms are still newcomers to investing in America and few work on the technological frontier, the Thomson Reuters data offers a glimpse of the advanced economy China aspires to build. Patented inventions by Chinese firms that involved at least one U.S. researcher roughly doubled worldwide in each of the last three years, reaching 910 in 2014.

Reuters

EUR/USD Returns to 1.14 on Greece Hope

The euro rose against the dollar on Monday on a glimmer of hope that Greece may avert a debt default after Athens offered new proposals to foreign creditors ahead of the emergency euro zone summit later in the day. The common currency EUR= ticked up 0.3 percent to $1.1383, inching closer to a one-month high of $1.1440 hit on Thursday.

But many investors remained cautious because it was not immediately clear how far the new proposals yielded to creditors’ demands for additional spending cuts and tax hikes, nor whether creditors can stomach the offer. “The euro is surprisingly solid. It’s either that markets are still betting that some sort of fix can be found for Greece’s funding woes or speculators are closing their short positions,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“Many players are sitting on the sidelines and nervously waiting for news headlines from Europe. It’s all about the euro today.” After four months of wrangling and with anxious depositors pulling billions of euros out of Greek banks, Prime Minister Alexis Tsipras’ leftist government showed a new willingness at the weekend to make an offer which they hope will unlock frozen aid and avert default.

Reuters

Oil Prices Steady as Greece Worries Ease

Oil prices were unchanged in Asian trade on Monday, after initially falling on concerns about the outcome of a eurozone meeting later in the day on the Greek debt crisis , although worries about oversupply still weigh on the market. Prices rebounded from early lows after a European Commission official tweeted the latest proposal from Greece was a “good basis for progress” in Monday’s talks.

Brent crude for August delivery was flat at $63.02 a barrel as of 0442 GMT (0042 EDT), after dipping as much as 52 cents when Asian markets opened. The benchmark lost $1.24 in the previous session.

Front month U.S. crude was at $59.58 a barrel, down 3 cents after finishing the previous session down 84 cents. Greek Prime Minister Alexis Tsipras offered a new reforms package to foreign creditors on Sunday in an effort to avoid default this month on 1.6 billion euros in debt repayments to the International Monetary Fund.

Reuters

Japan Blueprint to Propose Flexible Spending Limits

Japan’s government will release a fiscal blueprint on Monday that will recommend taking a flexible approach to limiting state spending rather than setting a rigid cap on the annual increase to reduce the government’s mountain of debt. A copy of the final draft, seen by Reuters on Monday, recommended limiting rises in general account spending to 1.6 trillion yen ($13 billion) for the three years to March 2019, but stopped short of calling for a mandatory cap on spending.

The absence of a binding cap could raise concerns that the government would be tempted to spend more if economic growth falters, increasing a public debt burden that is already more than twice the size of its $5 trillion economy and the largest of any advanced nation. The government has also set a goal of keeping GDP growth above 2 percent in real terms and 3 percent in nominal terms, according to the draft.

Policymakers are torn between banking on faster economic growth to increase revenues – as Prime Minister Shinzo Abe hopes – or exercising greater fiscal discipline to reduce the pressure on debt. “The government is operating on the assumption that economic growth does well and tax revenue really starts to take off,” said Norio Miyagawa, senior economist at Mizuho Securities.

Reuters

PM Tsipras Offers New Plan for Greece

Greek Prime Minister Alexis Tsipras presented a new plan to stave off default before an emergency summit Monday that could decide his nation’s future in the euro.

The new offer “was a good basis for progress at tomorrow’s Euro summit,” European Commission spokesman Martin Selmayr, said in a Twitter posting. He also referred in German to the inception of the plan as “birth by forceps.” The euro strengthened in Asian trading.

Before the start of the summit in Brussels, Tsipras will meet with representatives of the countries’ main creditors. He’ll sit down with European Council head Donald Tusk before they’re joined by European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde, EU Commission President Jean-Claude Juncker and Eurogroup head Jeroen Dijsselbloem, an e-mailed statement from the Greek prime minister’s office said.

Bloomberg

EU Welcomes Last Minute Greek Proposals

EU chief executive Jean-Claude Juncker’s chief-of-staff spoke of a “forceps delivery” as officials worked late into the night to produce a deal ahead of a summit of euro zone leaders in Brussels that they hope can keep Greece in the currency bloc.

CNBC

Looking Ahead in Asia

The long-running Greek drama is nearing a potentially catastrophic denouement, likely hijacking the market’s attention away from economic pulse checks on China and Japan this week.

Greece’s Prime Minister Alexis Tsipras submitted a new reforms package Sunday, offering the potential for a last minute deal to break the logjam in talks with the country’s international creditors. Greece desperately needs more aid before it runs out of cash and potentially defaults on loans to creditors.

Euro zone leaders are set to hold an emergency summit on Monday to “urgently discuss the situation of Greece at the highest political level” after Thursday’s meeting yielded no progress, with both sides refusing to compromise over what reforms Greece should make in exchange for more aid. The emergency summit comes just eight days before Athens needs to make a crucial 1.6 billion euro ($1.8 billion) payment to the International Monetary Fund (IMF) to avoid a possible default.

CNBC

Gold – Resistance at Key $1200 Level Fights Back

Gold – Monday 22 June 2015

In the last couple of days gold is easing back to below the key $1200 level after recently surging higher to a three week high above $1205. The $1200 level remains significant and is continuing to place selling pressure on gold. Prior to the surge and in the last couple of weeks gold has been content to trade around the key $1180 level. During last week it rallied well to move from a two month low near $1160 back up to above $1190 again before easing back to the $1180 level. The key $1180 level has consistently provided solid support and has held it up now for a couple of months, with the recent exception. A few weeks ago gold fell sharply back through the key $1200 level and spent the remainder of that week consolidating in a narrow range around $1190.

The $1200 level has been a significant level throughout most of this year and remains a key level presently offering reasonable resistance to higher prices, whilst lower the $1180 level continues to be significant. Throughout the last month or so the $1180 level has provided some support and has been called upon recently. Earlier in May it was able to make a run through the $1200 level to reach a three month high above $1230 however gold was quickly sold off and returned back to the $1200 level where it enjoyed some support for several days.

For around two months through April gold traded in a range between $1180 and around $1220 and had very few excursions outside these limits. Gold is currently pinned between resistance at $1200 and support at $1180 and it is surprising to see it trade in such a narrow range for several days. It seems it is waiting patiently for external factors to determine which level will be severely tested next.

(Daily chart / 4 hourly chart below)

g_20150622 g_20150622_4hour

Gold June 22 at 03:20 GMT 1198.9 H: 1201.2 L: 1196.5

Gold Technical

1180

1150

—

1200

1240

—

During the early hours of the Asian trading session on Monday, Gold is trading right around the key $1200 level after finishing last week easing back to this level after recently surging higher to a three week high above $1205. Current range: trading right around $1200.

Further levels in both directions:

• Below: 1180 and 1150.

• Above: 1200 and 1240.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for Gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for Gold has dropped back to 65% as Gold has surged back to the key $1200 level. The trader sentiment is strongly in favour of long positions.

Economic Releases

14:00 EU Flash Consumer Sentiment (Jun)

14:00 US Existing home sales (May)

JP BoJ Publish Monthly Report

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Australia 200 – Remains Below 5600

Australia 200 – Monday 22 June 2015

In the last few days the ASX200 index has crept higher and reached a two week high above 5600 whilst enjoying solid support from 5500 and even during this period it fell sharply yet enjoyed solid support from 5500. It was only a few weeks ago that the medium term down trend in the ASX 200 had reversed however just as quickly it has taken out the lows around 5550 and moved lower to its lowest levels in five months. If the support at 5500 gives way, then lower levels should be expected. The 5500 level has been solid in the last week or so and provided reasonable support to the index which has allowed it to consolidate a little around this level. A little higher up at 5800, this level remains large and continues to apply downwards pressure on the index, as this has been a significant level for the index throughout this year.

It will be interesting to see whether the index can garner enough support from the short term support level around 5500 which has propped the index up over the last week or so. Back in early May the Australia 200 index declined sharply from highs around the key 6000 level and whilst it paused a little around 5800 and enjoyed some support, it continued to decline down to a three month low around 5550.

Even if it was able to rally higher and move back through the key 5800 level, the index will rejoin the congestion range between 5800 and 6000 and likely find it difficult to move through there quickly. Accordingly the 6000 level which was spoken about at length for most of this year is now a distant level and is probably some time away from being seen again.

(Daily chart below)

asx_20150622

Australia 200 June 22 at 02:30 GMT 5566 H: 5601 L: 5560

Australia 200 Technical

5500

—

5650

5800

6000

During the early hours of the Asian trading session on Monday, the Australian 200 index is drifting lower below the 5600 level.

Further levels in both directions:

• Below: 5500.

• Above: 5650, 5800 and 6000.

Economic Releases

14:00 EU Flash Consumer Sentiment (Jun)

14:00 US Existing home sales (May)

JP BoJ Publish Monthly Report

* All release times are GMT

AUD/USD – Remains Steady Above 0.7750

AUD/USD – Monday 22 June 2015

In the last couple of days the AUD/USD has eased lower back to around 0.7750 after recently surging higher from below 0.77 up to a three week high> It did however, run straight into resistance at the key 0.7850 level, which has performed this role several times this year. The Australian dollar is presently consolidating in a narrow range right above 0.7750 after easing away from the key resistance level at 0.7850. Throughout most of last week the Australian dollar has traded quite steady around the 0.7750 level whilst receiving solid support from 0.77 before its recent surge higher. To start last week it took advantage of the support at 0.77.

Over the last few weeks the resistance level at 0.7850 has played a major role and continues to place selling pressure down on the AUD/USD. Throughout this same period it has been enjoying rock solid support from the long term support level at 0.76 which has allowed it to rebound strongly back up to above 0.78 on more than one occasion. Throughout the second half of May the Australian dollar fall sharply from a four month high above 0.8150 down to the key support level at 0.76. This level has been a significant level for a couple of months and has propped the Australian dollar up on multiple occasions. This recent price action has been a significant reversal as it wasn’t so long ago, the AUD/USD was in a solid medium term up trend having broken through the key 0.7850 level and achieved the four month high above 0.8150.

For most of this year the Australian dollar has traded within a wide trading range between the support at 0.76 and resistance around 0.7850. Earlier this year in February that range was tighter with the support level higher at 0.77. Throughout this period it experienced reasonable swings back and forth between the two key levels with very few excursions beyond the levels. The key level presently remains 0.76 and it will be interesting to see how well the support at this level can hold up and stop the strong down trend the AUD/USD has experienced over the last few weeks. The 4 hour chart below shows how steady the recent decline has been but equally how significant the 0.76 level in being able to temporarily halt the decline.

(Daily chart / 4 hourly chart below)

a_20150622 a_20150622_4hour

AUD/USD June 22 at 02:05 GMT 0.7777 H: 0.7783 L: 0.7760

AUD/USD Technical

0.7700

0.7600

—

0.7850

0.8150

—

During the early hours of the Asian trading session on Monday, the Australian dollar is trading in a narrow range right above 0.7750 after finishing last week easing back from the resistance at 0.7850. Current range: trading right above 0.7750.

Further levels in both directions:

• Below: 0.7700 and 0.7600.

• Above: 0.7850 and 0.8150.

OANDA’s Open Position Ratios

(Shows the ratio of long vs. short positions held for AUD/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for AUD/USD has edged above 60% as the AUD/USD has surged higher to resistance at 0.7850 and then eased back towards 0.7750. The trader sentiment is in favour of long positions.

Economic Releases

14:00 EU Flash Consumer Sentiment (Jun)

14:00 US Existing home sales (May)

JP BoJ Publish Monthly Report

* All release times are GMT

Week in FX: Emergency Eurogroup Meeting Top of the Agenda

The meeting of European Finance Ministers held in Luxembourg on Thursday, June 18 failed to make further inroads towards unlocking the Greek agreement negotiations. The European Central Bank (ECB) has increased the amount of emergency funds to Greek Banks that have been hit by the uncertainty about the fate of the country’s finances that has triggered massive withdrawals. The Eurogroup will try again to bring the two sides together on a Monday, June 22 emergency meeting. The forex market will be awaiting the outcome with the hope an agreement can finally be reached.

As talks broke down in Luxembourg thousands of Greek protesters gathered outside parliament in Athens on Thursday. The main message was that the government should avoid default and remain within the Eurozone, which entails taking the existing deal. The protest was heavily attended by members of the opposition party . A rally the day before that supported Prime Minister Alexis Tsipras’ decision to stick to their negotiation efforts with similar if not higher numbers. The size of both protests was smaller than in previous demonstrations and shocking given the fate of Greece hangs in a balance as the IMF repayment deadline approaches.

Monday, June 22

All Day Emergency Eurogroup Meeting to discuss Greece

10:00am USD Existing Home Sales
9:45pm CNY HSBC Flash Manufacturing PMI

Tuesday Jun 23

3:00am EUR French Flash Manufacturing PMI
3:30am EUR German Flash Manufacturing PMI
5:00am GBP Inflation Report Hearings
8:30am USD Core Durable Goods Orders m/m

Wednesday, June 24

4:00am EUR German Ifo Business Climate
8:30am USD Final GDP q/q

Thursday, June 25

8:30am USD Unemployment Claims
6:45pm NZD Trade Balance

The USD was rocked by the Federal Open Market Committee (FOMC) statement that had a dovish undertone regarding the timing of impending higher interest rates. The US Federal Reserve is sticking to the plan to raise the benchmark interest rate before the end of the year, yet the pace and forecasts of where policy members see the rate in the future has been downgraded. September continues to be the key FOMC meeting where the much awaited first rate hike will be announced, that is if the U.S. economy complies.

The U.S. economy had mixed data release during the week. Inflation came in under expectation at 0.4 percent after a 0.5 percent growth was expected. Unemployment claims continue to impress with a decline of 12,000 new claims from the previous week. The Philadelphia Fed Manufacturing Index surprised with a 15.2 reading crushing the expected 8.1. The recovery in the Philadelphia region increased from a reading of 6.7 in May boosting the dollar with positive news on the manufacturing front that has been affected by a strong currency.

From the currency moves after the FOMC it was clear that while Greece might grab more headlines it is the U.S. economy and the Fed that are moving the markets. The lack of commitment from the U.S. central bank to a date is not seen as a show of force. The September meeting is the most likely candidate for the announcement of higher benchmark interest rates of the world, thus marking the end of low rates era, at least in the U.S.

There are rising doubts about what would happen after the first rise. Originally the market had priced in a strong pace of rate hikes, that now appears unlikely given the mixed signals thrown by the economy. The abandoned “forward guidance” and other signalling devices used by central banks to avoid unwanted volatility have left a huge void to fill. Uncertainty and volatility have filled that void as the Fed is putting the timing on the decision on the pure indicators, rather than the analysis and forecast of said economic figures. This is the environment that makes the Greek situation so precarious as there is little needed to rock the boat.

The recently elected Greek government is using that to their advantage, or at least they are trying to as it could all end up with unwanted consequences for all party. The Greek accident rather than a planned Grexit. Greek PM Alexis Tsipras and his inner circle are faced with two worst case scenarios. Accept the deal as is, resulting in unhappy citizens as essential services are cut to achieve unattainable targets set by bureaucrats or refuse the deal, face default and rebuilding of a nation’s economy. Its no wonder Tsipras and Varoufakis are pushing for a third option that does not currently exist. The hardest part has been convincing the European Union and the IMF to go along with this third option that while not the worst possible outcome for creditors, does not rank as high as just going along with the original agreement.

EUR events to watch this week:

Tuesday Jun 23

3:00am EUR French Flash Manufacturing PMI

3:30am EUR German Flash Manufacturing PMI

Wednesday, June 24

4:00am EUR German Ifo Business Climate

*All times EDT

For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

China Flash PMI to Show Continued Slowdown Fears

China’s economy has posted mixed figures of late. Next week will see the release of the HSBC Flash manufacturing purchasing managers index (PMI). The results of the preliminary survey of purchasing managers in the manufacturing industry has struggled to register above 50 since February. A reading above 50 is considered expansion, while anything under that reading is a contraction. The Chinese PMI was published last month at 49.1. China’s economic rise boosted global growth and increase production of commodities to satisfy Chinese demand. The slowdown of the economy is one of the major risk factors impacting global growth. Internal demand has not offset the lost exports and Bank of China economists are now forecasting a turnaround in the second half of the year. The Chinese premier has warned the market about slower growth to avoid a sudden crash as indicators underperform. The central bank has already cut rates three times this year in an effort to stimulate the economy along with other measures, but it is too early to tell if they will have the desired effect.

The International Monetary Fund (IMF) said at the end of May that the Yuan was no longer overvalued. The Washington based organization went further and suggested that if the currency wants to be included in the Reserve Assets Basket it should move towards a free floating rate of exchange. China is caught in a difficult balancing act. Short term growth needs to be boosted in order to avoid falling further behind but at the same time long term objectives that include much needed structural reforms need to happen to secure long term goals. A free floating exchange falls into the second category, but it is not a priority if Beijing cannot guide China to a soft landing in the current macro climate.

The Chinese PMI disappointed last month by missing expectations at 49.1 when 49.4 was expected. The contraction was worse than forecasted and the leading indicator was a bad sign to commodity exporting nations like Australia and New Zealand that count China as their main trading partners.

China events to watch this week:

*All times EDT

For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

GBP Gains on Greek Turmoil as Deflation Avoided

The pound received a boost from inflation numbers in the United Kingdom released on Tuesday, June 16. The price of goods and services rose by 0.1 percent. The fear that the deflation experienced last month was to be permanent was broken by a small, but important growth that validates Bank of England (BoE) Governor Mark Carney that deemed it transitory. He is sure to follow on this line of thinking when he faces parliament on Wednesday, June 24 to face queries on the BoE’s Inflation Report.

While the U.K. narrowly avoided deflation, the risk remains of falling behind yet again as inflation is not due to pick up to near the central bank’s target until 2016 as per Carney. Inflation will continue at current levels, which will keep rates low in the United Kingdom until the small rebound in inflation proves to be part of an upward trend in consumer prices.

Cable has thrived under the Greek turmoil. Strong retail sales and wage growth after dodging the deflation trap has boosted the GBP/USD to seven month highs. The pound gained 2.05 percent during the week against the USD and 1.28 versus the EUR. GBP/USD had a weekly high of 1.5928, while EUR/GBP reached 0.7251. Mergers and Acquisitions activity will keep the pound bid as the Greek situation continues to add uncertainty to the market.

Monday’s Eurogroup meeting is likely to end with no agreement, but European Finance Ministers could find a way to kick the can down the road. They will have to attempt that without the International Monetary Fund that has already said will give Greece no grace period in its debt repayment obligations. The European Central Bank (ECB) has made no such threats, and its addition of emergency funds to add liquidity to Greek banks speaks of a more amicable relationship, that could result in an extension that could avoid Greece running out of cash as its financial institutions suffer major withdrawals.

GBP/USD events to watch this week:

Tuesday Jun 23

5:00am GBP Inflation Report Hearings

*All times EDT

For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

GBP Gains on Greek Turmoil as Deflation Avoided

Emergency Eurogroup Meeting to Discuss Greek Deal

The meeting of European Finance Ministers held in Luxembourg on Thursday, June 18 failed to make further inroads towards unlocking the Greek agreement negotiations. The European Central Bank has increased the amount of emergency funds to Greek Banks that have been hit by massive withdrawals as uncertainty about the fate of the country’s finances. The Eurogroup will try again to bring the two sides together on a Monday, June 22 emergency meeting. The forex market will be awaiting the outcome with the hope an agreement can finally be reached.

China Flash PMI to Show Continued Slowdown Fears

The Chinese PMI disappointed last month by missing expectations at 49
.1 when 49.4 was expected. The contraction was worse than forecasted and the leading indicator was a bad sign to commodity exporting nations like Australia and New Zealand that count China as their main trading partners.

EURUSD – Weekend Concern Halts Rally

The euro has shown fantastic resilience against the dollar in recent weeks in the face of a Greek default and messy “Grexit” that would create enormous amounts of uncertainty for the monetary union.

Having rallied as high as 1.1436 on Thursday, the pair appears to be running out of steam and I’m sure it’s no coincidence that this comes ahead of a weekend filled with uncertainty and risk.

In recent articles on this pair, I have argued that the uncertainty around the Greek situation is having no impact on the pair and it’s equally important to note that it doesn’t reflect people’s lax attitude towards Greece leaving, despite what is being suggested.

While interest rates and inflation may be driving the euro right now, not uncertainty, that doesn’t mean that Greece defaulting or being cut off from the emergency liquidity assistance (ELA) program, for example, won’t negatively impact it. These are real negative developments that could easily be followed by a Grexit that would have an impact on the eurozone and the amount of assistance the European Central Bank will have to offer.

The last two daily candles (including today’s which is not completed yet) are quite bearish, although not overly so. A shooting star is the more bearish of the two but the main body is green which takes the edge off. If today’s closes as it is, it’s a hanging man, which is bearish but not a great signal on its own. Combined though, I think they look quite bearish, or display strong indecision at the very least and around a key area of resistance between 1.14 and 1.1535.

EURUSD daily

The MACD histogram is showing signs of divergence as well, albeit marginally. These are not the most bearish of signs, but they are red flags.

The pair is rallying again now and if it continues, 1.1436 becomes very important as a failure to break it could lead to the formation of a double top. Also important is the ascending trend line on the 4-hour chart which has held strong until now. If this is broken, for me it would be a strong bearish warning.

EURUSD 4hr

Ultimately, only a break above 1.1535 will make me bullish at these levels and ideally, I’d like to see a daily close above here. To the downside, 1.1050 is extremely key but there should be warning signs before then that the pair has turned more bearish.

One key point here is that the forex markets are closed over the weekend. Any significant developments on Greece in this time could have a major impact on the opening levels next week. If a Greek deal is done, I would expect to see some upside in response but I think there is a far bigger risk to the downside if talks completely collapse which would lead to a collapse.

I don’t think either of these will happen as an EU Summit has been arranged for Monday to discuss Greece while the ECB has agreed to have another teleconference on Monday on the ELA, having extended it to Greece today. The latter in particular could have been a big risk to Greece over the weekend had that not taken place today.

UK Government Borrowing Falls in May

A rise in income tax and VAT receipts helped to cut UK government borrowing in May, official figures have shown.

UK government borrowing fell to 10.13bn in May, the Office for National Statistics (ONS) said, down from 12.35bn a year earlier.

It was the lowest borrowing figure in May for eight years.

Public sector net debt excluding public sector banks now stands at 1.5 trillion, the ONS said, which is 80.8% of gross domestic product (GDP).

“While the deficit in the financial year ending 2015 has fallen by more than a third since its peak in the financial year ending 2010, public sector net debt has maintained a gradual upward trend,” the ONS said in a statement.

Income tax receipts recorded their highest level for May in four years, rising 0.5bn, or 5.3%, from a year earlier to 10.8bn. VAT receipts rose by 0.6bn, or 5.6%, to 10.7bn.
The ONS also said that it now estimated total public sector borrowing in the financial year to March 2015 was 89.2bn, or 4.9% of GDP.

While this figure was slightly higher than the previous estimate, it was still 9.3bn lower than the previous year’s total.

via BBC

Greek Banks Health Questioned after Mass Withdrawals

Fears are growing over the health of Greek banks after indications that savers have withdrawn billions of euros in the past week.

Capital flight from beleaguered Greek banks this week alone could be more than €3bn (2.1bn), reports say.

Savers are moving funds as time runs out to resolve Greece’s debt crisis.

The European Central Bank (ECB) has approved more emergency help for the banks and will review funding again on Monday, officials told news agencies.

The amount of extra funding has not been disclosed.

The pace of withdrawals has gained speed as talks between the government and its creditors have collapsed.

Greece has less than two weeks remaining to strike a deal or face defaulting on a €1.6bn (1.1bn) loan repayment due to the International Monetary Fund (IMF).

via BBC

China Stocks Suffer Worst Fall Since 2008

Chinese markets have suffered their worst weekly performance since the financial crisis due to a flurry of initial public offerings (IPOs) and concerns about stricter trading rules.

A record $1.1tn (693bn) worth of funds is locked up for subscription to IPOs, analysts at IG market said.

The benchmark Shanghai Composite fell by 6.4% to close at 4,478.36 and dropped more than 13% over the week.
That marked the index’s worst weekly decline since 2008.

However, in Hong Kong the Hang Seng index bucked the downward trend and rose 0.3% on Friday to close at 26,760.53.

via BBC

ECB to Offer More Emergency Funding to Greek Banks

Greek banks were offered more emergency funding on Friday, amid fears that massive fund outflows may prevent its lenders from opening next week.

It comes as investors keep a close eye on Greece, after talks with euro zone finance ministers failed to reach a deal. An emergency meeting has now been slated for Monday, as officials scramble to keep the country from defaulting on its debt – and possibly even leaving the euro zone.

via CNBC

Finnish FinMin Says Eurogroup Hit Dead End on Greek Talks

Greek bailout negotiations have hit a dead end, Finnish Finance Minister Alexander Stubb told CNBC after Athens and its creditors failed to clinch a deal during a Eurogroup meeting in Luxembourg on Thursday.

“I think we’ve come pretty much to a dead end. We’ve been trying to find a solution for a long time,” Stubb told CNBC. “The ball has been firmly in the Greek court ever since the beginning and I think it continues to be there,” he said.

The emergency summit comes just eight days before Athens needs to make a crucial 1.6 billion euro ($1.8 billion) payment to the International Monetary Fund (IMF) in order to avoid a possible default.

As the deadlock continues, there appears to be less of a will among euro zone finance ministers to keep Greece in the euro zone compared with a few months ago.

via CNBC

US Markets Lower After Thursday’s Rally

U.S. stocks turned lower after a mixed opening on Friday, a day after Wall Street rallied and the Nasdaq Composite index broke its last standing milestone from the dot-com era as it set a record intraday high.

All three major indexes were still on track to end the week higher.

On Thursday, Wall Street was boosted by strong data, which pointed to signs that the U.S. economy was recovering after growth came to a halt earlier in the year.

U.S. consumer prices last month increased the most in more than two years, jobless claims applications last week fell to a near 15-year low and factory activity in the mid-Atlantic region in June accelerated to a six-month high.

The U.S. Federal Reserve’s perceived dovishness regarding the pace of a rate hike also continued to boost equities.

Investors may see a spike in volume and volatility at the open and toward the closing bell as Friday marks a “quadruple witching” day – the expiration of stock options, index options, index futures and single-stock futures – as traders close hedging positions or roll them over at the last minute.

via Reuters

Commerzbank Suggests Greece Could Sell Gold Reserves to Make Payment

Eleventh-hour negations between Greece and its creditors passed Thursday with no resolution in sight but one European Bank said that the beleaguered nation has one more Hail-Mary shot, but it’s only a short-term solution and could exacerbate the situation.

In a note published Friday, German-based bank Commerzbank hypothesized that Greece could sell some of its gold reserves to meet its debt obligation by the end of the month; however, the bank also recognized that this is an unlikely scenario.

“According to the latest [International Monetary Fund] statistics, the Greek central bank holds 112.5 tons of gold, worth €3.8 billion at current market prices. This equates to a good 1% of Greek government debt and 66% of Greek foreign currency reserves. Greece could in theory meet the €1.5 billion payment due to the IMF at the end of the month by selling 47 tons of gold from its reserves, if no agreement is reached with international creditors on the payment of bailout funds,” the analysts said in their research note.

They also noted that this scenario, an emergency sale of Greece’s gold, could be one reason why gold hasn’t benefited from increased risk aversion sentiment.

via Kitco

Oil Falls as Higher Supplies and Greece Pressure Crude

Oil fell toward $63 a barrel on Friday as concern over Greece and a forecast that U.S. shale oil output would keep growing this year countered signs of a pickup in demand.

Greece has been less of a driver for oil than other markets such as equities, but analysts said the situation represented a bearish risk heading into the weekend. Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default.

Brent crude LCOc1 for August had dropped $1.00 to $63.26 as of 9.45 a.m. EDT, while U.S. crude for July CLc1 was down 78 cents at $59.67. Both contracts made gains on Thursday.

“Oil markets are not pricing much in terms of Greek risk but most of the European oil demand growth this year is coming from the southern countries,” said Olivier Jakob of Petromatrix in Zug, Switzerland.

“Therefore, if there was a Greek default and a contagion of a risk premium to other southern European countries it could have a negative impact on European oil demand.”

Saudi Arabian oil minister Ali al-Naimi said he was optimistic about the market in coming months, given increased demand and falling inventories, state media reported on Thursday. U.S. crude stocks declined in the latest week.

via Reuters

Saudi Oil Exports Fall in April

Saudi Arabia’s April crude exports fell by 161,000 barrels per day (bpd) as domestic refiners processed more crude, official data showed.

Exports fell to 7.737 million bpd from 7.898 million in March when they hit their highest levels in almost a decade.

Domestic refiners processed 2.224 million bpd, up 315,000 bpd from 1.909 million bpd in March, figures supplied by Riyadh to the Joint Organisations Data Initiative (JODI) showed.

JODI compiles data supplied from oil-producing members of global organisations including the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC).

Saudi Arabia has traditionally been the world’s biggest exporter of crude and the kingdom’s rapid transition into one of the largest oil refiners adds an extra dimension to global oil markets.

The growth puts its national oil company Saudi Aramco’s owned or equity stakes in refining at 5.4 million bpd, at least 40 percent above a decade ago.

Aramco itself markets more than 3 million bpd of that, tying it with Shell as the world’s fourth-largest oil refiner.

via Reuters

Gold Higher on Safe Haven Flows

Gold was steady and set for a second weekly gain on Friday, bolstered by the U.S. Federal Reserve’s caution on an interest rate rise and worries over Greece, but a recovering dollar capped the gains.

Spot gold was up 0.1 percent at $1,202.47 an ounce by 1331 GMT, after a 1.3 percent rise on Thursday, its biggest daily increase since mid-May. Prices are up 1.8 percent this week so far, the biggest weekly increase in over a month.

“The boost that gold got from a more dovish Fed this week slightly improves the technical picture, leaving $1,225 as the next biggest resistance level,” ActivTrades chief analyst Carlo Alberto de Casa said.

Gold hit a three-week high on Thursday on a softer dollar after Fed policymakers said a rate increase would be appropriate only after further improvement in the labour market and greater confidence that inflation would rise.

“The rate move, a stronger dollar and the re-pricing of the U.S. yield curve will limit any upside,” Danske Bank senior analyst Jens Pedersen said.

Non-interest-paying gold has benefited from a record-low rate environment following the 2007-2009 credit crisis. Higher rates would increase the opportunity cost of holding the metal.

via Reuters

ECB raises emergency funding cap for Greek banks

The European Central Bank (ECB) has raised the funding cap on its Emergency Liquidity Assistance (ELA) for Greece’s banks, according to a CNBC source.

The decision, made in a conference call Friday and first reported by Reuters, followed a meeting of the euro zone’s finance ministers on Thursday, where the ability of the country’s lenders to open up for business next week was questioned.
It comes as a specter of a run on Greek banks is looming, after yet another round of failed rescue-for-reforms talks.

The valuation of the Greek banking sector has fallen by nearly a third since the start of June as concerns about the risk of Greece leaving the euro zone grow.

On Friday morning, banks were open in Athens city center and there seemed to be a steady stream of people making withdrawals at ATMs, as observed by CNBC. The mood appeared calm and there weren’t any lines forming; it was difficult to judge whether the banks were any busier than usual on a Friday morning.

Of course, measuring ATM queues doesn’t take into account the number of people transferring money in other ways. Also, Greece is still an economy where many of the transactions that are done via credit cards in other Western countries are regularly done in cash.

Yannis Stournaras, governor of the Bank of Greece, Greece’s central bank, said on Friday that he “confirms the stability of the banking system.”

There are still a number of moving parts governing what will happen to Greece’s banking system, however.

CNBC

Calm before storm? Stocks rally as Greece in crisis

Global stock markets were eerily calm on Friday as Greece teetered on the brink of default that could end with it exiting the euro zone.

European stocks markets were broadly higher, Japan’s blue-chip Nikkei closed up almost 1 percent and U.S. stock futures pointed to further gains on Wall Street where the Nasdaq Composite index hit a record intraday high on Thursday.

This comes against a deepening crisis in Greece. Euro zone officials hold an emergency meeting on Monday after failing to reach a cash-for-reforms deal, while talk of capital controls has grown amid reports of a massive outflow of funds from the country in recent days.

“We’re beyond the point of just talking and it looks like capital controls will have to be put in place,” Craig Erlam, senior market analyst at currency trading firm OANDA, told CNBC.

“We have reached a tipping point and this is not a time to be optimistic in markets.”

CNBC

Greece talks fail; emergency summit called

Euro zone leaders will hold an emergency summit on Monday after a the region’s finance ministers failed to agree a reform-and-aid deal with Greece, making it more likely the near-bankrupt country will default on its debt at the at the end of the month.

European political leaders and economists are now preparing for financial turmoil and potential capital controls in Greece on the back of a Reuters report that Greek savers had pulled about 2 billion euros out of banks over the past three days.

The large deposit outflows seen in Greece prompted the European Central Bank (ECB) to reportedly express doubts on whether Greek banks would open on Monday. The ECB is to hold a teleconference on Greece on Friday to discuss extending emergency liquidity to the country.

The emergency summit was called after the euro zone’s finance ministers – the so-called Eurogroup – failed to reach a deal on reforms with Greece when the group met in Luxembourg on Thursday.

The reforms would allow Greece to receive a last tranche of bailout aid worth 7.2 billion euros but sticking points remain over pension cuts. Without the money, Greece has said that it could not make a 1.54 billion euro ($1.74 billion) debt repayment to one of its senior creditors, the International Monetary Fund (IMF), on June 30.

After five months of stalled talks over reforms, Greece now has just the weekend to come up with a last-ditch plan to present to creditors in order to stave off the ignominy of a default — and what its own central bank predicted the recently would be an “uncontrollable crisis” following such an event.

CNBC

Why $1,200 is important for gold

Gold’s close above $1,200 an ounce may mean a lot more than you think.

Future prices for the metal rallied Thursday, with the August contract surging $25.20, or 2.1%, to settle at $1,202 an ounce on Comex, the highest close for a most-active contract since May 22.

To be sure, the rally was impressive. It was the largest single-session point and percentage gain in about five weeks. But the fact that prices have rallied above $1,200 is a milestone in its own right.

The rally above that level comes at a time when gold prices tend to mark a low for the year, according to Frank Holmes, chief executive and chief investment officer of U.S. Global Investors. They sometimes then climb by up to 20%, Holmes told MarketWatch.

Earlier this month, futures prices touched lows near $1,170, though dipped close to $1,150 in March at their worst this year.

Due to the “DNA of its volatility,” it would be normal for gold to move plus or minus 15% from its lows, said Holmes, who didn’t say that prices have hit a bottom.

Still, he leaned more toward the plus side for gold, saying it would be reasonable to see the metal end the year around $1,350 an ounce.

The second half of the year tends to see events that have a bigger impact on the consumption of gold in the form of gift-giving, such as the holy festival of Ramadan, the wedding season in India and Christmas, said Holmes.

The $1,200 level also marks a “sweet spot” for gold producers in terms of production costs, he said.

Is There Any Way Greece Can Avoid Default?

Part of what divides Greece and its creditors is the detail of budget cuts and economic reforms demanded by eurozone governments and the IMF.

And the rest of the gulf is due to a monumental clash of expectations between the scope of what can be agreed by the deadline of 30 June.

What is clear both from what the Greek finance minister Yanis Varoufakis said last night and has released in his blog is that he is still arguing for a once-and-for-ever settlement – that includes a further reconstruction of Greek public sector debts to make them more sustainable.

He is arguing for a buy-out by the eurozone’s financing arm, the ESM, of the European Central Bank’s 27bn euros of loans to Greece – because the repayment schedule on these loans (or bonds) is yet another accident waiting to happen.

But although Varoufakis is doubtless right that it would be rational to pre-emptively remove this threat of probable future defaults, the eurozone is institutionally incapable of doing so at this juncture. It completely lacks the decision-making capacity – such is the dispersal of power between the member states and their respective parliaments.

If further cuts are socially and politically impossible for Syriza’s government, it needs to come up with some kind of bankable counter-offer.

Part of the sub-optimal political and economic compromise that is the eurozone, is that it can’t chew gum and walk at the same time. Greece needs to wake up to this inescapable if disappointing reality.
And if Greece’s government, led by Alexis Tsipras, wants to avoid default, it needs to concentrate on two issues in particular.

First there is the now small gap between Greece and the creditors on the scale of austerity required by 2018 – which has shrunk to the equivalent of just 0.5% of GDP in 2016.

Second is the demand by the creditors for cuts to Greek pensions.

BBC

Greek Risk Brushed Off Ahead of Uncertain Weekend

It’s been a rather bizarre start to the trading session on Friday, as all the negativity around more failed Greek talks, possible default and capital controls over the weekend is met with strong gains in equity markets and falling yields in bond markets.

We are headed into one of the most uncertain weekends for a long time and yet looking at the markets you’d swear everything is hunky dory. Talks failed once again at yesterday’s eurogroup meeting and none of the language that followed from senior officials was positive. Eurogroup Head Jeroen Dijsselbloem was very pessimistic about a deal being done in time for a disbursement to be made to Greece by 30 June, when a €1.6 billion repayment is due to the International Monetary Fund.

While the IMF has claimed that no grace period will be afforded to Greece, you would imagine if a deal is reached before then they would accept a late payment and not deem them to have defaulted. But a lot needs to be done before that can even be considered and progress is simply not being made. Greece Finance Minister Yanis Varoufakis claimed after the eurogroup meeting that its latest “deficit break” proposal wasn’t even discussed. This hardly suggests the two sides are getting any closer to a deal.

Another point of concern is reported comments from ECB Executive Committee member Benoit Coeure who apparently claimed that he didn’t know whether banks would be open on Monday. This suggests that he anticipated capital controls possibly being imposed in Greece over the weekend following the surge in withdrawals that have occurred this week. The ECB will discuss its ELA program today via teleconference and if it decides to reduce the funding it offers, either through haircuts or by cutting Greek banks off altogether, capital controls would be extremely likely.

An emergency E.U. summit has been arranged for Monday for discussions on Greek reforms to continue in an attempt to resolve the impasse. The meeting comes eight days before the repayment is due to the IMF which should apply great pressure to both sides to come to some agreement, even a short-term deal that allows the country to avoid defaulting. Without a deal on Monday, the European Central Bank may opt to lean on Greek officials and apply haircuts to the collateral received from the country’s banks. That’s assuming they don’t do so today, with Greek banks apparently confident of raising their borrowing via the emergency liquidity assistance program by €3.5 billion.

With all of this risk over the weekend, it doesn’t feel like there’s much to be optimistic about. It’s been suggested that the gains in European markets and in US futures can be attributed to optimism over a deal being done or a belief that a “Grexit” would be a positive thing but this seems a little hard to believe. Two other things would explain today’s moves much better. Either they’re technical, with many European indices ending yesterday’s session with rather bullish setups, either hammer candles or engulfing patterns, which would explain today’s correction after large losses recently. Or, today’s quadruple witching is driving the bizarre moves, which again is more likely than anything Greece associated.

One clue could come from how indices end the day. If we see heavy selling into the end of the session, it would highlight just how worried people really are heading into such an uncertain weekend. The problem is that if we see some very negative developments over the weekend, markets could gap significantly lower on the open on Monday which can cause quite a bit of panic.

The S&P is expected to open 3 points higher, the Dow 32 points higher and the Nasdaq 12 points higher.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

The Skinny on Central Banks – RBA, BoE, FED, SNB and BoJ

This mix of overt and subtle withdrawal of market support is a key macro driver of recent increased volatility. Aside from Euro-Greek fiasco this week, there has been a handful of Central Bank rate announcements, growth projections, press conferences and minutes for the investor to digest.

Having calmed investors for the past half-dozen years with low interest rates, bond-buying (QE) and other interventions aimed at shoring up weak economies, some global monetary policy makers are preparing to exit capital markets in a number of ways.

To date, traders and investors have been overly reliant on policy makers for direction, and its time for them to prepare to be weaned off. Perhaps more so than ever, it’s important for capital market participants to have their finger on Central Banks pulses as market volatility increases.

Reserve Bank of Australia (RBA)

On June 16, the RBA released the minutes of its June 2nd meeting where it surprised the investors with a more neutral policy stance against expectations of renewed easing bias.

The RBA minutes straddled both sides of the fence, stating the “Board’s assessment was that the stance of monetary policy should be accommodative” and also adding “members judged that it was appropriate to leave the cash rate unchanged and to assess information on economic and financial conditions as it became available.”

Governor Stevens continues to point to a period of waiting to assess development, which suggest that the RBA could be sitting on the sidelines for the remainder of this year. The Governor has always been prepared to talk down the currency at every opportunity. The Aussie dollar remains at the mercy of China growth and commodity prices.

Bank of England (BoE)

Tuesday’s U.K CPI data was a bust for the pound hawk, however Wednesday’s BoE minutes; U.K jobs data and earnings have been a boon for the long sterling positions. The pound has since spike to multi-month highs after the U.K ILO unemployment level came in at a seven-year low and average earnings rose +2.7% vs. +2.55% expected.

Earlier, the MPC minutes for the June meeting showed that all nine members voted to keep the Bank of England’s (BoE) benchmark interest rate at +0.5% and also voted unanimously to keep monthly QE at 375b.

Nevertheless, the minutes did have a “hawkish” tint with inflation expected to rise notably by late 2015. The two officials (Weale and McCafferty) who voted for a rate hike as early as last December again sit on the “finely balanced” fence. Fixed income dealers have brought forward the first BoE rate hike by two-months and are pricing in a rate lift off for the end of Q2, 2016.

Federal Open Market Committee (FOMC)

On Wednesday, the FOMC had little in the way of real surprises, but as is often the case trading picked up after the Fed left rates unchanged.

The USD was never going to find much support after the FOMC lowered growth forecasts over the rest of 2015 and also revised down their interest rate projections for 2016 and 2017 by -25bp. Perhaps more importantly, the committee offered no consensus on the number of rate increases for this year. A large percentage of the market had been expecting the Fed to clearly signpost the timing of rate liftoff stateside.

The Fed has successfully muddied the first rate hike timing schedule, which is pressuring those investors who had been expecting a stronger commitment by the Fed for a September rate increase to unwind or pare back on their long dollar positions.

Technically, the dollars rally has stalled since mid-March mostly on uncertainty over the Fed’s intentions and this weeks meeting should confirm that investors can expect heightened market volatility across all asset classes even more so going forward. As well as unwinding dollar positions, investors have had to unwind their own market complacency factor.

The Feds statement should be eyed as short-term negative for the dollar, but a long-term plus. U.S rates will eventually end higher, but investors must now adjust to the fact that they are to get there more slowly than previously anticipated.

Swiss National Bank (SNB)

The first Central Bank to make a major policy shift was the Swiss National Bank, which rocked markets last January by unexpectedly scrapping its three-year policy of capping the CHF at €1.20. Their underhanded actions certainly lost some street credibility, but it has put investors and traders on edge whenever an announcement is being made.

On Thursday, the SNB kept interest rate policy steady, as expected, but noted the threat of possible safe-haven flows stemming from the Greek crisis. The accompanying rate statement reiterated that the CHF currency rate remained high (€1.0443) and overvalued. The Central Bank expects to remain active in the forex market if necessary. Governor Jordan said that he saw the CHF weakening over time, however, with global uncertainty remaining high, the situation in Greece could jeopardize the Swiss recovery.

Nevertheless, with the CHF currency continuing to serve as safe-haven due to the situation in Greece will always have traders on edge – the SNB has proven unpredictable.

Bank of Japan (BoJ)

On Friday, the BoJ stayed on course without any additional dissent. In the accompanying statement it maintained its monetary base at the annual pace of 80t (as expected) and maintained its overall economic assessment. The only change made was a slight boost to the BoJ’s assessment of the housing market, which policy makers now seen as “starting to pick up”. Governor Kuroda expects CPI to hit +2% in H1 of FY16, and expects pricing to rise toward +2% target as oil price effect fades. As expected, the Governor reiterated that Bank would continue easing until +2% inflation was stable and that they would adjust policy as needed.

For the USD/JPY bull, the Bank of Japan (BoJ) policies are still divergent even if the Fed’s rate-hike timing remains vague.

It’s worth nothing that the BoJ has reduced the number of its official meetings each year to just 8 from 14, but increased the number of instances when it publishes its GDP/CPI projections from 2 to 4.

Forex heatmap

ECB Call on ELA Eyed as Greek Impasse Goes On

As we head into what could be a very interesting weekend for Greece, investors appear surprisingly calm, with futures currently pointing slightly to the upside ahead of the European open. They’re not necessarily displaying the kind of risk aversion you might typically see ahead of such an uncertain weekend.

Of course, there have been significant declines in European indices over the last few weeks as negotiations have gone from bad to worse so much of this has already been priced in. In fact, from a technical standpoint, many indices in Europe are giving a rather bullish signal, with yesterday’s candle being either a bullish hammer or completing a bullish engulfing pattern.

The eurogroup meeting on Thursday once again failed to produce any kind of agreement on Greek reforms and despite all of these discussions, the two sides appear as far apart as ever. Neither side is willing to compromise on the final issues which are believed to be pension reform and VAT. Greece is also pushing for debt forgiveness which is a long shot really given that the country is requesting more aid.

An E.U. summit has now been arranged for Monday as eurozone leaders try once again to resolve the impasse. If nothing changes between now and then I don’t see what they hope to achieve that has not been possible already. Eurogroup Head Jeroen Dijsselbloem claimed yesterday that already, the implementation of a deal and disbursement to Greece is unthinkable before 30 June, when Greece needs to repay €1.6 billion to the International Monetary Fund.

The European Central Bank is believed to be holding a teleconference today to discuss extending emergency liquidity assistance (ELA) to Greece. Reports yesterday that ECB Executive Board member Benoit Coeure, when asked if Greek banks would open today, replied “tomorrow, yes. Monday, I don’t know” would suggest the central bank may be considering cutting them off which would create some very serious issues for the Greek government.

For now, the ECB may opt to apply further haircuts to what it accepts from Greek banks in exchange for the liquidity assistance in an attempt to ramp up the pressure on Greece ahead of Monday’s summit, without causing a complete meltdown. It’s only a matter of time until the banks are cut off altogether as they can’t possibly be considered solvent when cash is being withdrawn at the rate it is.

We could see cash withdrawals in Greece increase dramatically today, having already picked up significantly this week from around €200-300 million per day to €2 billion between Monday and Wednesday. If what Coeure said is true, capital controls could be in place by Monday which would cause widespread panic given that the banks have become so dependent on ECB funding.

In the absence of any major data releases today, the Greece story is likely to dominate once again. It will be very interesting to see whether the jitters kick in as we progress through the session and investors begin to become more risk averse ahead of such an uncertain weekend.

The FTSE is expected to open 10 points higher, the CAC 3 points higher and the DAX 31 points higher.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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