Last night the Greek parliament approved the new austerity plan. Hence the Greeks have moved a step closer to having the next tranche paid out; Greece needs this to avoid national bankruptcy this month. Now we are awaiting the Eurogroup meeting on Wednesday when the finance ministers will meet and hopefully approve the plan. The general strike that has begun in Greece together with several violent incidents will definitely not be supportive of the economic development in the country. We find it difficult to imagine that the 'Greek problem' will disappear even if this agreement is reached.
Overnight saw GDP data from Japan. The figure came to -0.6 for Q4 (estimate -0.3). Particularly three circumstances had an adverse effect on the figure. 1) the drain on inventories was extraordinarily high; 2) public investment fell, which came as a surprise because a large pool has been earmarked to rebuild the country; 3) exports fell.
The good news is that private demand seems to be stable, which is very important when we look ahead to the next quarters, and also it is assessed that some of the negative effects are temporary.
EURUSD (BUY): We recommend BUY; T/P at 135; S/L at 130.88. We recommend adjusting stop/loss up to Wednesday's bottom at 132.28 if the cross rate is traded up above 133.50. Technically EURUSD is still stable within the broad falling trend channel that it has traded in since April/May last year (red channel). Since end-December, the cross rate has traded upwards in a broad wedge formation (typically a wedge formation ends with a strong breach on the upside or downside). At the bottom of today's chart, it appears that MACD is about to give a sell signal, and due to that together with the continued divergence as shown on the daily chart (between the rate and the RSI indicator), we recommend that S/L is quickly pushed up accordingly.
We will very likely see a sideways movement or a slight strengthening of EURUSD over the next couple of days and then on Wednesday we may see a strong reaction when we get the final agreement at the Eurogroup meeting (either positive or negative).
EURPLN (Neutral to BUY): T/P at 437. S/L at 414.50. EURPLN is one of the most attractive cross rates for a correction (the definitely most appealing is USDPLN, but only seldom do our clients trade that cross rate). Adjust to entry at 426.
EURNOK (NEUTRAL): We are slowly getting ready for a Buy recommendation. Now there is only 1.4% to go before we reach the old bottom at 748.88 in September. Hence risk/reward is beginning to look good. Despite the healthy Norwegian economy, we do not assess that NOK will strengthen on that background. We are looking at the level 754-56 or an entry.
Chart: EURUSD
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