Greeks Request Balloon Payment, IMF Cuts US Growth June 5, 2015
Greeks Take Three Week Reprieve As Expected
In all reality the Greeks had no choice but to take the IMF offer of an end of month balloon payment on repayments owed this month. Its actually a good thing that they have a few payments coming due or the probably wouldnt have qualified for the deal. This has bought them another three weeks giving them more time to come to an agreement with the troika but it seems that they will be looking to either reshuffle the government or at least putting forth some concessions to their people to try and remain in the Euro.
There has been talk of a vote of confidence coming for the Greek Prime Minister so my thoughts that things would quiet down regarding Greece for the next couple weeks have less probability now. They have essentially already defaulted even if its not a legal default as of yet that would trigger all the derivatives held on Greek debt so it is just a matter of time if they cant make a deal of some sorts. Given, its not quite as urgent since they aksed for the bundling package but if Tsparis loses a vote of confidence then all bets are off. Then the government reshuffle happens and if by chance the far left gains power Greece is almost sure to leave the Euro. However if the people do decide that leaving the Euro is best I expect they would rather have the more moderate Syriza party doing it rather than the Nazi far left.
The other interesting development yesterday was the IMF downgrading US growth from 3.1 to 2.5% this year, asking the Fed to hold off on a rate increase until 2016. I have to admit I had a little chuckle when I saw that. Ok I almost fell out of my chair laughing but whos counting? The funny part is that just about everyone and their brother know that not only the IMF but the Fed is and has been historically wrong about US growth and is always in error to the upside rather than the downside. So nothing new here but the fact that they would ask the Fed to put rate hikes on hold is a whole new ball game. In short there will be no rate hikes from the US this year and most likely any year in the near future. Something many have been saying all along due to the figures being fudged to make it look like a recovery when its all an illusion. The farce will continue until it cant.
EUR/USD Runs Stops Before Reversal
With the EUR/USD hitting stops to the highs and making a clean push down I will be bias for the short today. The early conviction seems to be holding for now but I will want to see it held by London or they may push up to 1.1282 before turning later in the day. Although the Asian highs at 1.1242 are the best level I expect that if the conviction holds they may only push to yesterdays lows at 1.1220 before running south today. Since it is NFP day there is also a decent chance they hold off on any move until the release.
GBP/USD Runs Stops Both Directions
The move on the GBP/USD yesterday leaves direction more unclear seeing two daily rejections against a potential push. If the USD strength is to continue then it will drop with the EU but there is also the possibility that they see the GBP as the cleanest dirty shirt for now and we see the EU and GU run different directions. Today I will be open on direction on this pair. The best level for the long is down at 1.5312 but if they do hold some GBP strength the higher risk level at 1.5347 nay hold being just below the Asian lows. Otherwise I will be open for the short at 1.5395 as long as I see the USD strength holding and the EUR/GBP isnt running wild.
EUR/JPY Maks First Push Down With EU
The EUR/JPY is still holding step with the EU since the USD/JPY cant decide where it wants to go. The early conviction below yesterdays low does show weakness but as usual the move should be dictated by EU movement. As long as they hold the break lower on both pairs it should make the second push down today. However considering the NFP release later it has a chance to move back into third push chop mode with the EU. As long as we dont get a move back up the 139.61 is the best place to short but a test into 139.86 to run short term stops may be in the cards as well. I will be open for the long from the Asian lows but only if the EU is showing Euro strength.
Forex News Today
The two releases to watch during the London session are German Factory Orders and Euro Zone GDP. With expectations of a drop to .5%in the German data it will likely take a disappointment below zero to get them pushing Euro weakness. GDP data is expected flat and I see a higher probability of a disappointment than an improvement but will need a big miss to create a sustained move before NFP is released.
US NFP expected at 225K is likely to be close. Any miss will probably cause a whip saw movement because they wont know what to do. A good improvement would need to be around 300K to get them thinking the Fed will raise rates with a back drop of the IMF growth downgrade. The same goes for a disappointment. It should get them thinking USD weakness as a rate rise leaves the table but the possibility of a risk off situation taking hold seeing USD strength as stocks take another hit also has its merits.
Happy NFP Day
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