Wednesday, July 20, 2011

Morning Forex Review - Greek Debt Plan Stokes the EURUSD

Coming Up Today (all times GMT)
  • EUR EU Economic Summit (All Day)
  • GBP Public Sector Net Borrowing (8:30)
  • GBP Retail Sales (8:30)
  • USD Initial Claims (12:30)
  • USD Philly Fed Index (14:00)
  • Fed Chairman Bernanke Testifies (14:00)
The Euro has strengthened in overnight trading on reports that France and Germany have agreed on a plan regarding Greece’s debt before today’s EU Summit. France and Germany will head the EU’s buying and reselling of Greece debt. The plan will push back the expiration of upcoming Greek debt, and diminish Greece’s short term liquidity issues. What remains to be seen is how the ECB will view the plans. The ECB has stated that any restructuring will be considered a default by Greece. On the news, the EURUSD climbed 60 pips to a high of 1.4270.

Elsewhere, Forex traders are awaiting today’s US Initial Claims figures. A better than expected result could trigger gains in US equities thus driving additional buying of riskier currencies.
As mentioned above, the EURUSD has spiked higher to its highest levels of the week. However, the pair remains below last week’s high of 1.4281. Forex traders will be watching that resistance level closely, as a failure to trade above 1.4281 will reveal a lack of follow through demand in the Euro. Looking ahead, today’s EU Summit is expected to cause volatility in the EURUSD, as Forex traders interpret statements from government officials about a Greek debt resolution.

Support/Resistance 1.4200/1.4281
Other than a short lived drop following yesterday’s MPC Minutes, volatility has been lower than normal in the GBPUSD. This could reflect that Forex traders are unsure exactly which direction the Pound is most likely to head. Also, with speculative short positions out numbering buyers by a wide margin, there may not be enough ammo to generate follow through selling pressure. As such, the GBPUSD could be well set for a positive breakout if it can trade above its 1.6175 and 1.6200 resistance levels, if today’s UK economic news is better than expected.
Support/Resistance 1.6060/1.6175

Published: 21 July, 2011
written by: Ron Finberg ,  Analyst